It's actually got it's own problems though. Everyone will vote yes to lower taxes, but also vote yes to spending more on schools, welfare, etc. Referendums are best if fiscally neutral, but that makes them hard to use for lots of issues.
I doubt the equilibrium would be perfect.
Even if the balance tips only 2 or 3 percent towards less tax / more spending, it would still represent the citizens opinion better than the decision making models of modern day democracies do.
