To set up compounding taxes, please setup compounding precedence for both taxes. If you want the Tax 2 to be compounded on Tax 1, the Tax 1 should have more precedence than the Tax 2.
After creation of taxes, setup Tax Formula for Tax2 with Formula Type as 'Taxable Basis' and taxable basis type as 'Prior Tax' and compounding tax as tax 1 and rule as 'Add'. Use this Taxable basis formula as a default rule for tax 2'.