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?

The only problem is externality pricing.

Building https://negationgame.com

we raise taxes to address externalities

so whatever you think private industry can't profitably address (public goods or public bads) you're gonna have problems

this is the biggest downside i see. worth asking: would whatever “tragedies” that occurred in this system still be better than the alternatives we observe today with compulsory payments?