For example, what's the real difference between operating a fire department in a town on the Faroes, vs a town in the Mid-west? It seems like a fairly cookie-cutter operation where requiring more of them in total does not add complexity to each operation.

Possibly even the opposite, where the scale of the US turns into a net benefit, so you can support your own industries building and providing tenders/appliances - where the Faroes are (I assume) more likely to ship one from Germany.

So I'm not clear why taxation within a single state has to be more complex than taxation within a small nation. I'm not going to deny that it probably is, and probably will be, but I'm less comfortable with the assumption that it must be.