Well this would explain why my cash flow kept dipping....so you're saying houses that are upgraded from hovels to shanties (or w/e) are basically dead for taxation purposes? This would bear out, because my economy started to crash right when my main city started upgrading. It was low until I researched Slums and demolished all the shanties, replacing them with slums.

So maybe a work around is just to methodically demolish all upgraded shanties and replace them with rebuilt ones. Cities don't have that many by the time they reach Lvl 3, so you'll only lose some pop by doing it.