So the federal government is essentially taxing the state's citizens, then giving some amount of it back to the states in exchange for rowing the boat in the right direction. States that increase their own taxes to compensate for refusal of federal funds would become noncompetitive to other states who don't.
The biggest handout of all is small states getting two senators despite having 1/50th the population. SALT deductions are nothing in comparison, you could always redirect federal money to make sure red states are net beneficiaries of federal money… and whaddya know, even with the SALT deduction they were.
It's antithetical to the federal nature of the US that the overwhelming majority of tax dollars are paid to the federal government and not to state and local governments. The federal government's share of taxation should be limited to support its constitutional mission, and more should remain at the state and local level to achieve state and local missions, including things like social services and infrastructure.
That way, some states may choose to have an expanded role of government with high levels of social services and infrastructure spending, some may choose the opposite, and none are left sucking on the federal teat -- the milk from which, may I remind you, are collected from people who live in every state, not just the ones with "better infrastructure".
In the end government money is just people's money taken by taxation. When you let the federal government take most of it, you allow it to browbeat the states into doing whatever the federal government wants, conveniently escaping the limitations that the Constitution placed on it.
To summarize:
“Our Constitution is not good. It is a document designed to create a society of enduring white male dominance, hastily edited in the margins to allow for what basic political rights white men could be convinced to share. The Constitution is an imperfect work that urgently and consistently needs to be modified and reimagined to make good on its unrealized promises of justice and equality for all. And yet you rarely see liberals make the point that the Constitution is actually trash. Conservatives are out here acting like the Constitution was etched by divine flame upon stone tablets, when in reality it was scrawled out over a sweaty summer by people making deals with actual monsters who were trying to protect their rights to rape the humans they held in bondage.”
Excerpt From Allow Me to Retort Elie Mystal https://books.apple.com/us/book/allow-me-to-retort/id1549926... This material may be protected by copyright.
The framers were well before the Industrial Revolution; if they intended a right-libertarian bias, the economy they wanted unchecked was a smaller and tamer beast than this one. But anyway, they did give us the Commerce Clause.
They were well before radio, TV, internet, trains, automobiles, airplanes, nuclear power, and many other things that do not strictly respect state lines. "Leave most decisions to the states" made a lot of sense in 1789 but we live in a different world now.
It makes sense if you sort of skim over the idea that Germany, Sweden, and Spain are just "states" in a federation. But obviously, they are not.
Maybe a US state is something legally different than an EU country, maybe not. I would say the two weren’t intended to be different, and whatever trends have produced such a difference were a mistake. Either way, that doesn’t address the practicality question.