Why would you not go to the higher level governments?
I'd like to know that too. By not changing to a Federation he is losing out on a lot of money (40% bonus compared to 10% from the Republic).
Also, why is he reducing spending? The spending rate has no effect on the voting at all. The only reason I could see is, if setting his tax rate to 31% would bring him below the -500bc debt threshold, if he kept spending at 100%.