In the case of US gov., they’ve been caught repeatedly selling taxpayer info for money. THAT is the problem.
Yes, this is a problem but I don’t think that you can fix it by making it harder to identify people… Because that also increases identity theft, general criminal behavior, make you unable exert other rights etc.
Yes, a “non shitty verification system” like what EU countries do. Want to validate your identity? Sure show your ID card with a photo and smart card, insert into a smart card reader and the person can attest your identity against the info there. Same goes for using those cards to make signature forging a thing of the past.