Old One said:This was essentially my point...although apparently I didn't make it very well...
I don't advocate using such tools with any regularity, but they can be very effective if used properly.
If the campaign is "we kill them, take their stuff, rinse and repeat", then the ideas floated above won't work very well, period.
However, in a dynamic campaign world, offing the Grand Duke's men could very well be political suicide. Imagine, at the next meeting of the King's Council, the Duke complaining to the King about the party refusing to return his rightful property and demanding immediate redress. The PCs could easily be declared outlaw, forfiet all rights, titles and property, etc. History is replete with such actions from the earliest days.
Roman and Byzantine emperors routinely outlawed generals or other political figures that had become too powerful, seized their property and land and otherwise made their lives miserable. Look at what happened to the Knights Templar when their power, wealth and influence became a (percieved) threat to the ruler of France. Those that defied medieval monarchs or religious authorities could easily find themselves on the wrong end of the headsman's block or excommunication.
if you do use the tax man to take the PC's items, be prepared for your campaign to be totally destroyed.,
everyone hates the tax man. Why is the legend of robin hood so well regarded? pc#s hate to have their items taken away from them. They hate it and loathe it with a passion.
The PC's will kill the tax man and the followup squads of guards. Sure they are now wanted criminals declared as outlaws by their own actions. Thst's you screwing up your own campaign. All those roman and byzantine generals who were outlawed that Old one mentions, what did they do? they went on to topple the emperor who did that to them. That's what your campaign will become. You are pushing the PC's into becoming that kind of force.