Still, why exactly are level caps needed?
It's a design tool. When used properly they create the treadmill/timesink that keeps the end-game players distracted long enough for new end-game content to be slowly incorporated into the game.
This is the Everquest model.
And level cap raises were designed to take you a bit of time so that the top raiding guilds didn't just waltz through each new expansion.
Things are not exactly the same these days but the remnants of that model persist.