Also remember that tax rates in this game are global or theater based. If you want to raise taxes in one region, they will be raised in all regions in the same theater. You can raise taxes as high as you want. You can double click a city and then scroll through all of your cities to make sure that the peasents and nobility are content. They will have a green or yellow face on the city display. Each time before you end your turn, scroll through the cities displays to make sure that there are no red(unhappy) faces.

A high tax rate has a negetive effect on the wealth of a region each turn. This is your tax base, and you can stop it from depleting each turn by researching techs, and upgrading roads, buildings, farms and workshops in the region.