He never collects taxes with the guerrilla camps. He keeps them around for extra defense, deletes them, collects taxes, and re-buys. The actual cost of the camps is so minuscule he doesn't even notice it. Heck with his solider count he probably saves money throughout the whole process.
Most use photoshop I would assume. However GIMP is a popular free alternative for photoshop. If you want to make a simple flag MS paint would work great as well. MS paint, if you are using windows, should already be on your computer.
As for tips, just experiment, mess around with things until you find a design you like. Good luck!