As far as I know, if someone says their character is Lawful Good, they better act like it, or else they're gonna have to suffer an additional alignment change when they randomly kill the innocent peasant. If someone's alignment is Chaotic Evil, they better act it, or have a very good reason for not doing so.
If alignment is just used in a gaming group as a word scribbled on a piece of paper, then this may be overpowered. Being Chaotic Evil will make it slightly difficult when you need to talk to the Cleric of Pelor and you feel the need to murder him.

I'm not sure of a better way to represent the penalties associated with being evil in a town of good people. I'm definitely open to suggestions though.

(Evil is MEANT to be more powerful though- think about it. It's much easier to get paid off rather than arresting a drug cartel, that's why dirty cops exist. The difficult route gets you a place in heaven, the quick route lands you in hell. NO RELIGION being brought into this, I assume an Abyss and Celestial, D&D style.)

I'll add a clause about losing all Corruption abilities if your alignment is forcibly changed.