I don't really think it's a restriction: you could always adjust by making less farms/working less

-intensive tiles.
That said, I agree that the proposal doesn't really thematically fit the idea of a Sanitation System at all.
What was inelegant about Gandhi's vanilla UA (something like +2

per city, -50%

from population)? That seems to be the easiest way to achieve the desired goal of having Gandhi go tall.
But when you do the math, you break even at something like 4 population, and even in wide empires I suspect most cities are larger than that.
Well, at 20% as in VEM, the breakeven point would be much higher at 10

.
How about something like "-15%

from population, -3

per City with at least 10

Citizens"? Or "-3

per 10

Citizens in a city"? A bit inelegant, I grant... going from 9 to 10 citizens (or 19 to 20, in the second case) in a city would be a huge jump.
Something interesting getting at the same goal might be "-25%

from Population in Cities with at least one National Wonder."
Zaldron has it right. The per-city anger might appear to be a wide empire penalty, but in practice it just penalizes early expansion. After the first few cities are up and running the vanilla trait also favors wide empires.
I don't see how the vanilla trait for Gandhi could favor wide empires over tall empires compared to no trait. It might well be that, even with the trait, the best way to play Gandhi is often wide, but I still think the trait is still pushing us towards tall and away from wide.
I guess your point, which is pretty subtle if you ask me, could be that is that the -%

from population means it's possible to sustain a much larger population than we could otherwise, and that because of the food/citizen growth formula, it's much easier to attain a much larger total population with a wide empire than is possible with a tall one.