How to remove unnecessary System Data?

Seems like Logs might do it. We might glean some info using an Etrecheck report...

Are you running any VPN, Anti-Virus, or Cleaning apps?

We need to see what all is running, a report from this will not display any personal info...

Using EtreCheck - Apple Community

EtreCheck is a FREE simple little diagnostic tool to display the important details of your system configuration and allow you to copy that information to the Clipboard. It is meant to be used with Apple Support Communities to help people help you with your Mac. It will not display any personal info.

https://www.etrecheck.com/

Thanks for Old Toad’s etrecheck instructions…

Slow iMac 2017 - Apple Community

Use the Note tool on the bottom of this editor's toolbar, as shown in the image, to copy and paste the output from EtreCheck. In a Reply before you click post, look for this to add longer texts...

Follow previous advise by @BDAqua

User wrote " It seems to me like apple is trying to force me to buy more icloud storage.. "

iCloud was not and is not intended to act like and External Drive where you can dump large amount of Files Off the Internal Drive and Onto the External Drives

Thereby crating Empty Space on the Internal Drive

It is designed to have files on iCloud Drive so you can access these files from any of your Other Devices using the same Apple ID Account and also using iCloud.

Changes you make on one file on device are automatically uploaded to iCloud and the changes will be reflected when opened on the other devices

That is how iCloud works and is not a Storage Space to make room on the Internal Drive