Well, local governments (cities and towns) also have expenses -- police, fire departments, trash collection, water and sewage, roads, public works. Schools are partially funded locally. That has to be paid for.

It's theoretically possible for a local government to levy an income tax, but a lot would need to change -- much more than just changing tax rates. Employers and banks report income to the federal government (and states, I suppose, but I live and work in Texas so I don't know much about that). They would have to report that information to towns and cities too. There's also the problem of granularity -- how does an employer or bank know where someone actually lives? If you have a P.O. box in a town, do you have to pay taxes in that town? If you work in a different municipality (not uncommon!), do you have to pay taxes there too? If you have a home in one town, work in another, but spend most of your free time hanging out in a third, are you completely off the hook for supporting the third town?

You could have the federal government collect all the money and then allocate it to state and local governments, but that's a massive change in how American society works, and I'm not sure it's any less complex in the end. Some of the complexity in the tax code (e.g. different levels of capital gains tax) is a policy choice, but some of it reflects the complexity of the real world.

I tend to agree with this. The logic should be the same with different rate tables for each taxing body. What I don't want though is the Fed govt being the collector and distributor of all the funds. They already weld too much power with their various funding influences for transportation, healthcare, etc. The states and local govts shouldn't need to pander so heavily to the federal govt for funds.

It seems efficient and simple that way. But you don't want federal politics playing that much of a part of your local life. And you don't want your local politicians to have to pander to the federal levels just to get what they need or what is theirs. I think this would result in disaster as the federal politicians are too out of touch with local needs.

If we had a single formula for taxes, then each taxing body could have their own rate table to apply to it, but still collect it directly - then I think that would be a better approach.

For simplicity sake, take income tax at flat rates. Federal may be 20%, your state might be 10%, city might be 5%. Maybe my state rate is only 5% and you might want to move here, but nationally we all pay the Federal 20% rate.

It literally does, this is one of defining differences of a federal system, that the states have a right to set and collect taxes.

It sorta does, that's one of the primary points of a federal system.

By definition, a federal system does prevent a single point of collection and distribution. If states could not or did not collect taxes on their own authority, it would not be a federal system. States would just be adjuncts of a national government.

You’re absolutely correct. For income taxes many states and the federal government offset each others debts.

In Canada provinces can choose to harmonize taxes or collect independently.