It's primarily because the US was not designed to be tied to ethnicity (on paper) unlike most other countries at the time. Like The United Kingdom, it was a collection of peoples, not its own people. It's like the difference between being British and being English. The former is a nationality that includes practically all subjects of the United Kingdom in the British isles, regardless of ethnicity, whereas English is an ethnicity from the Kingdom of England.

No one's ethnicity is American, your ethnicity is whatever you (or your family) were before you were American. Hence the temporarily PC term of 'African American.'

The legal definition of hispanic is literally "almost everyone who claims to be Hispanic is and it includes no one who doesn't"

I think you're supposed to put "Caucasian" since the definitions of ethnicities is wonky. Like people from the middle east are legally Caucasian, because a judge was too scared to say that Jesus wasn't white lol

But you could be an indigenous American too if you want. You have a fair claim as a Latina

Not like anyone is really going to verify it, and if they do the slightest justification will hold up. Like you said, the whole system is wonky and has that old school race science feel