This is absolutely how it works. Co-writing still gets you a little pin money. I co-wrote with a producer who was the producer for Stock Aitken and Waterman's Hit Factory and works to this day with Kylie Minogue. Lovely, lovely bloke, great to work with, did a little minor surgery on three of our tracks, and he took 4%. Every little helps
Conversely, Robbie Williams probably took 4% from most of his songs for shite like "and that's a good line to take it to the bridge", and the George Formby-Esque masterpiece "my breath smells of a thousand fags, and when I'm drunk I dance like me dad".
With the absolute greatest of respect to you, comparing Taylor Swift, who I do think is very talented, to one of the greatest and most influential pop icons of, and across the last 40/50 years, is a bit of a stretch. Bowie transcended music. Taylor Swift is really, really fucked off by her choices of boyfriends.