OK, this is going to a list of my suggested improvements to the game... my plan is to edit this original post as I expand/refine my ideas.

Let's start with economics and budgeting -- some very simple changes to the existing system...

SPENDING:

1) Get rid of the Industrial Capacity overall slider and instead control the three spending categories directly. These could be set from 0% to 100% -- the utilization of the player's available research and production facilities -- nice and simple.

2) The three categories should be Production (instead of Military), Infrastructure (instead of Social), and Research. Factories would only be used for Production (producing units), as they represent assembly-lines. Infrastructure is not impacted by factories... each improvement can be built at a certain speed and cost. It's the difference between building Model-T automobiles and building Hoover Dam... they're totally different things.

3) Research is performed on a separate per-planet basis -- each planet picks a technology to research and planets can't cooperate -- if you set two or more planets researching the same thing, progress is at the rate of the fastest planet. Each planet is basically a "research team" -- this will make for a better game, as the player will have to spread his research efforts around (like governments do in real life) and he will have an incentive to centralize his research facilities (like in real life, we didn't have 10 nuclear scientists in every city researching the Manhattan Project, we had them all in Los Alamos working together as a team). Before you jump up and down saying you can't split research up in a strategy game, it actually was that way in X-Com... bases couldn't work on common projects, hence the smart player would simply centralize his research facilities in one or two bases... in fact you could have a single base working on more than one project (that's not to say it was a good idea).

4) Planets can have any (or all) of their three categories set to "priority" -- this means that if the player has budgeted less than 100% in a category, those projects with "priority" are given full funding before any others. For example, if a player sets his production spending to 60% and he has five planets with equal capacity, he can set one to "priority" giving it 100% funding, with the others funded at only 40%, or he could set three planets as priority, giving them 100% funding and the others getting 0% funding. It's possible that you could actually have a particular planet with all three categories prioritized... there's nothing unrealistic about that... the facilities exist on the planet... they're just all in use at the same time.

5) Government production should be limited by the available population on the planet. OK, let's assume the above "everything's prioritized" example, and in this special case, let's also assume it's a class 20 planet and that every building on the planet is either a government factory or a government research lab... suffice it to say there's a whole lot of government work on that planet. Well, at some point, they should simply run out of workers if the population isn't large enough to support all the work available... even if you try to give it 100% funding for everything, there just aren't enough people available to get 100% of the work done... so the extra money isn't spent.

6) The government activity at each planet should be subtracted from the available tax pool at that planet. OK, this is probably hard to follow, but ultimately government spending is paid for by taxing non-government economic activity... so what I'm saying is that the aforementioned planet filled with labs, factories, and infrastructure development projects all given 100% priority is going to have a LOT of its population working for the government, and those people won't be engaged in private industry... they won't be generating wealth for the government to tax. So, my solution is to effectively subtract those people from the available tax base.


TAXATION:

1) Get rid of the centralized slider and do taxation on a planet-by-planet basis. Resulting nightmarish micromanagement can be avoided by giving players a governor function where you tell it to always adjust the tax rate to maintain a specified approval rating on the planet.