No, that's just a stupid way of collecting taxes; if they didn't tax your gross wages, the effective rates would just be higher (so be happy!). Afterall, it costs what it costs. Right now, as you say, the Federal Government has 'first dibs' -- I think tax collection in this country is inverted: the local authority should give you a "total bill" for your whole package and should pay the next layer up, etc. until the state sends money to the feds. If Washington got their money this way, you'd better believe they'd find a way to streamline it.
I've mentioned this before, but the only reason you as an individual "pay taxes" is so that they can track you; there's no good reason why most W-2 income filers in the US should actually have to pay/file directly. Employers could deal with all of this (your net pay is your net pay) and cut down on something like 93% of the overhead (and confusion!) associated with individual income taxes.