Why do PIs say no to students working during grad studies?
I have the impression that you are pretty aware of the main reason why PIs tend to frown upon outside jobs - they take time and mental energy, and most PIs will expect you to commit as much as you can of both to your grad school project. Hence, working on the side will typically  affect the student's performance negatively.

There is also the added problem that outside jobs often provide unwanted rigid commitments, which tend to interfere with the somewhat unstable nature of grad school workload. It is exceedingly annoying for a PI if a major paper deadline needs to pass, because the student also had important duties at their day job that they could not get away from.