I want state governments to have a reliable online identity option. I want it to be optional by law - I should be able to make an in person visit instead. I do not want private parties to have any access to the service whatsoever. I want private sector outsourcing of such services to be completely outlawed. No private third party has any business knowing about my interactions with any government provided service.
I should never have to share my data with private third parties in order to receive government services. Such usage data is very sensitive and thus a huge privacy concern.
Consider: If you ever had to go on food stamps, would you want retailers, potential employers, etc to be able to purchase that data? What about the risk of a data breach?
My last link points to a blog recommending the USPS provide in person proofing, which I believe meets your in person proofing requirement. Login.gov is a service operated by the US government's GSA agency. It is not a private entity providing this service. It was developed as part of 18F and the US Digital Service.
It might be a high hill, though softening to allow contractors involved in providing the service to know but requiring them to observe privacy rules similar to what would apply in the healthcare space under HIPAA, would make it much lower.
At the state level, for either version, I would recommend, if possible in your state, you to work with advocacy organizations who are willing to sponsor a public ballot initiative rather than focussing on policymakers alone; while industry insiders can and will buy ads against ballot measures, they can't cut them off by compromising strategically targeted legislators the way they often can bills in the legislature.
It is one of the reasons ID resolution in the US is largely outsourced to private entities, which have no such restrictions.
It absolutely could require one for functions within the federally-regulatable sphere, and not prohibit its use for private and state functions.
(If it was national-but-decentralized, it could just set standards for the digital ID and let states issue them, the same way it has for physical ID, see, e.g., REAL ID.)