Exactly.
(I hope I'm gonna be able to keep this short... God knows I haven't always been able to in the past)
There are two different ways to 'balance' wide vs tall against one another. Assuming wide is better without balancing, as it means more cities, one way to balance is to penalize wide, while the other is to give bonuses to tall.
In Civilization V, we saw the balancing done by penalizing wide. To be precise, global happiness slowed down any expansion to a trickle - if you were to build one city too much in the early game, all your cities would basically stop growing. Additionally, if you happened to conquer like, two cities while you were doing fine in happiness, you took a hit of sometimes as much as thirty happiness to your balance - enough that you'd immediately have to stop conquering due to happiness problems. Might be fine on a standard map size still, but if you're looking to conquer the world on a huge map, you'll probably need to conquer sixty, seventy cities if not more - a very daunting task if happiness problems already arise at two cities.
And that's the minor of the two main penalties. The bigger one is every city owned artificially increasing the costs of any technologies or social policies you're researching. There's not much more to be said about this.
These mechanics combined created a kind of a scale of the total usefulness of your empire. If you have very few cities, then an additional city is an improvement (as you get twice as many yields from two cities as you do from one, ignoring any additional mechanics). If you have a lot of cities, however, a new city costs you more than it gets you - yes, you may gain a few culture per turn, but less than you need to compensate for that 5% increase in social policy cost. In fact, fewer cities might allow you to advance faster. This together makes for a sweet spot - less cities is worse, but so is more cities. In the case of Civ 5, which also had a bunch of social policies affecting four cities only, this sweet spot was at 4 cities - it was better than having 3, and it was also better than having 5.
The other mechanic, however, is giving bonuses to tall. First of all, bonuses to tall mean that you don't give up anything by building a new city. This means that there is never a number of cities after which a new city is a bad thing, as long as it is free; it may only give you two science, one culture and enough gold to pay it's own maintenance costs, but it still gives you two science and one culture. However, there is still a minor cost to expanding, one that is intrinsically related to Civilization's gameplay - you have to either build a settler and settle the city (worth the cost in the vast majority of the cases, which is a good thing as it means the map will fill fully) or you have to build an army, declare war, suffer a diplomatic (and happiness) penalty and go ahead and conquer a city - in quite a few more cases not worth it (assuming proper balance, let that be clear). This means that, while it is never a bad idea to expand, it may be a worse idea than doing something else - like build a wonder from that production you'd pour into your army otherwise.
Additionally, there can be bonuses specifically linked to tall. A bonus for reaching a certain size for example, or city-size depending trade route yields (sadly absent from Civ VI for the most part). These bonuses may only be accessible when building a few big cities and not spending food and production on expanding, but you're making a tradeoff - either you build a settler or you let the city grow for a size bonus - instead of getting punished for one of the decisions.
Basically, penalties are bad, bonuses and choices/tradeoffs are good.