Federalism limits the power of government by creating a separation and balance between the national and state governments. The federal government has certain powers for making important decisions while state governments can make their own laws governing local issues.
The two levels of government must share their influence. State governments deal with smaller, domestic issues while the federal government handles nationwide concerns. Under Article I, Section 8 of the U.S. Constitution, the national government is limited to certain powers, including levying taxes, minting money and declaring war. The 10th Amendment grants the states any powers not given to the federal government or specifically forbidden to the states. For instance, states can also levy individual taxes and manage roads and schools with their own legislation.