I was colonized and I did exactly that. Ported the city to a new state and built new city near it, transferred all resources and troops to new city. Then I set production to "0", tax rate to "0" and destroyed all sawmills, mines, quarries in the colonized city. Now my overlord get 15% of the providence (which is very little) Once he gets tired of getting nothing and gives up the colony, I will start building it up again.