It isn't really a bug, just an odd choice of game design. I noticed this too when I first played ages ago. The game assumes that if you have 1 town and nothing else that that is all the sims in your city know of. There is no place else to move away too if you raise taxes in the only town in the universe because...it's the only town in the universe. Playing with taxes can can be very creative in the game, learning the balance when you make many cities with different tax rates is a bit hard at first but worth it. Playing with taxes while having just one city is highly inaccurate.