First of all because agencies get away with charging that much so you're just undercutting yourself needlessly unless you join in.
But secondly because there are big costs; liability insurance and software licensing being some of them.
I'm also not sure what sort of data the people in this thread are working with. I can't make $125k per year in the midwest as a fulltime developer (unless I'm freelancing - and even then keeping steady contracts has been near impossible). In fact I'm not seeing those numbers anywhere outside of the west coast - I applied for a fulltime job in CO recently and they balked at $90k... said they couldn't go over $60k.
Edit: recently quoted a local client at $75 per hour... he looked visibly perturbed and never got back to me.
A few contracts back I quoted $80 per hour and was told max budget was $60/hour (which I had to accept out of desperation).
I hear a lot of talk on the internet (especially HN) about people making massive amounts of money as contractors, but I have yet to see this in action. On the other hand $10k per month isn't that bad.
Perhaps they deliver a different sort of value than an individual freelancer? Having a larger staff, having multiple people with different expertise, separate billing/financial folks, admin folks, etc. They provide a different set of services and customer experience - some people want/need that, some don't, but just because agency ABC is charing $200/hr doesn't mean every else can "get away with that" as well. Just being able to have 4 people work simultaneously on a project may be worth the increased pricing for some clients.
Liability insurance isn't that big a cost, and unless you're focused on some really niche industry, "software licensing" probably isn't that big a deal for an individual freelancer. I'd be surprised if even with multiple systems, those combined costs are more than a couple thousand per year (much less for most people I know).
Health insurance is going to be a far bigger expense than almost everything else put together for most folks.
MSDN $2kpa. Liability $1kpa. I guess it's not "a lot" but if you're only doing a little work (as I was) it was a substantial portion of the profit gone; I spent more on hardware though.
I don't even do MSDN costs. :) But there are definitely some overheads - insurance, I have office space (coworking), services (bookkeeping, etc), transportation - conferences, etc. I may have, say, $12k in overhead each year - including health insurance. That cost is pretty much the same whether I bring in $15k or $150k, and certainly if you're bringing in $15k, those expenses are far higher % of income.