I suggest that razing a kingdom city makes the other kingdom's more hostile to your sovereign and more likely to join in an alliance against your kingdom/empire.
I would like to see such actions (razing an enemy's cities) also inspire them to adopt a similar policy towards your cities.
I agree, but only after they get the city spam under control. I played a medium map on normal today and the first Sov I ran into on turn 54 had 14 cities. It is not even fun right now because of it. I want to develop a Kingdom/Empire, not race to see how many cities I can start. Razing them is the only thing you can do with them right now. Make limitations on the number of cities and I would absolutely agree with a penalty for razing a city.