In essence, the Taxonomy of Errors is a response to that perennial problem faced by teachers of dealing with a class that are all making the same mistakes. It is a method for trying to ensure that students learn from each others' mistakes as well as from their own. It is a method for trying to ensure that when they next attempt the same task, they will improve markedly rather than incrementally because they have addressed a range of foibles in their work.
In practice, the Taxonomy of Errors is little more than a summary of all the feedback that you have given to the students as individuals with a focus on the comments you have written time after time after time. Sometimes I have even been known to rank them in order of frequency!!!
Here's my latest feedback to my Y11 English students, and in it I have focused even more on the creation of a genuine Taxonomy of Errors (that may have been how it was intended and I have just found my way to it the long way around!!): from the basics that are genuinely beneath this groups of students, to the intermediate and advanced. This feedback was from an essay on An Inspector Calls where the students were (to a greater or lesser extent) all guilty of simply trying to rewrite their controlled assessment work on Arthur and Sheila rather than respond about the Inspector as they had been asked. I was therefore able to show them how the error at the intermediate level was preventing them from accessing the higher grades, and thereby making the feedback on higher level errors virtually redundant (most students achieved only between 17 and 21 marks out of 30 because of their intermediate errors).
So there you have it. In my classroom the Taxonomy of Errors is used for three purposes. In its most simple guise it tells the students what mistakes have been made, by others as well as themselves, so that they can get a sense of their achievements alongside those of their peers. At a more sophisticated level the Taxonomy of Errors allows me to rank the impact of different errors on their marks and/or grades by showing them how basic or intermediate errors can undermine work that in other ways might have the potential to achieve highly. But the Taxonomy of Errors is at its most effective when it informs my planning so that students are taught (or re-taught) the knowledge or skills that had been demonstrated so poorly in their submitted work. The Taxonomy of Errors is at its most potent when it is used in this way and results in the students being asked to edit or rewrite the error-strewn original in a conscious attempt to improve it. The Taxonomy of Errors is at its most rewarding when it helps make marking have a genuine impact on learning.