what are the downsides of voluntary taxation (https://en.wikipedia.org/wiki/Voluntary_taxation)? what would happen to a polity that used it as the sole form of capital allocation?

In theory forced tax action is voluntary - you elect for and against it. Perhaps representative democracy is a bug post blockchain. 

Would great to run an on-chain experiment like the one cited in the wiki.

Reinventing illiquid assets.

Starting with venture @ www.withgrove.com 

I’m interested to read this draft and contribute if I can. 

How I’m looking at this: blockchain solves for the error of direct democracy that’s being solved today by representative democracy (inefficiently).

in theory, yes. in practice, no. trying to imagine what the possible negative externalities might be with a system like this. (we're currently working on a white paper that lays the mathematical foundation for the on-chain experiment)