Because it is not tested and regulated as to it's alcohol content and purity. Much the same reason that stores cannot sell wild game meat.
It prevents the government from collecting the taxes on the alcohol.
The primary reason is that moonshine does not pay the proper taxes. The 'Revenuers' that are always referred to as looking for the stills are actually agents of the Internal Revenue Service. Now days...
Yes it is illegal to distill any liquor , IN THE UNITED STATES...
(in the US) The mananufacture and possession of untaxed alcoholic beverages is against the law.