I agree 100% with everything you wrote. But, what would happen if we did away with federal income tax all together, and put the government on an allotment that was only big enough to maintain the military and ensure domestic security. What would the outcome of such an action be? Now that we're 50 states with widely-ranging needs instead of 13 colonies with similar needs, what would happen?
The first issue I see hitting us would be mass flights of citizens from states with low populations to states with high populations, since states with low populations would have to radically increase state taxes in order to survive. And since most of the highly-rural heartland produces most of our agriculture, that would hurt. I could also see states beginning to regulate travel between other states, charging fees for entry/exit, duties and tariffs on goods, etc. I think that before long we would look like Europe in the 1960s and 1970s.
I'm also looking at things like energy. In the Founding Fathers' day, energy was candles, lanterns, whale oil, horses, and oxen. What would the impact be of each state importing, developing, and selling it's own energy? Nothing really good comes to my mind.
So I'm thinking that federal taxes may be illegal, or unneeded in the eyes of the Founding Fathers, but could we really get along without them, and the government they pay for, in this day and age?