Clearing up Photos stored on Mac (and not iCloud)

You can enable iCloud sync in photos, photos, settings, iCloud and choose optimize storage. This will keep original photos in iCloud and optimized versions in photos to reduce the storage used. Items are synced so deleting in iCloud or on the Mac will delete in both locations.

store your photo library on an external drive. Move your Photos library to save space on your Mac - Apple Support

loadstone007 wrote: I have iCloud storage, everything should be pulled from the cloud. How do I do that?

That's just isn't the way it works. iCloud doesn't replace your Mac's storage-- it copies the Photos Library so that Photos at iCloud has exactly the same pictures as Photos on your Mac-- not instead of.

As muguy says, iCloud offers "Optimized Storage" that can store only smaller images on the Mac and rely on iCloud to keep the full sized images. Having screen-sized images stored locally allows you to quickly scan through your pictures while saving lots of storage space. And, if Optimize is chosen, and you want to Edit a picture, Photos will reach out to iCloud to get a full sized image for you to work on. Your optimized Library may take up less than 20% of the space of a fully downloaded Library. But an optimized Library may be kept larger than that if the extra storage space is not needed.

The downside of "Optimize" is that, since the originals may not be on the Mac, then backing up the Mac will not save your pictures. And it's important to realize that iCloud is not a backup service. iCloud a synchronization service. If you make mistakes in editing your pictures, or if you delete some, even accidentally then those changes will be automatically and immediately copied to iCloud. There's no backup to mistakes.  A backup, like you keep on an external drive, is supposed to not ever change, so you can go back to it if something goes wrong. But iCloud Photos changes all the time. It makes exact copies of your pictures, and it makes exact copies of your mistakes.

I hope that you are backing up your precious pictures to an external drive. If you choose Optimize, so your originals are not local, then you will need a plan to back them up. Here is a suggestion of how to do it:

Backup iCloud Photos with an Optimized Mac - Apple Community

Let us know how it goes…

loadstone007 wrote: with 'optimize' enabled. It still keeps 40GB of photos and videos and I can't remove them without turning off iCloud.

I'm guessing that your Photos Library is several hundred gigabytes, and Optimize lets you see all the pictures with only 40 GB on the machine. The solution to a packed internal drive is adding an external drive, but that's a bit weird with a portable MacBook. I decided to get a small (1 ounce) SSD and put files I use less often on that. Because of all the background work that Photos does, I wouldn't want to put my Photos Library on an external drive, unplugging it and plugging it back in all the time.

Handling having too little storage space has always been awful. Ask my wife who has filled  one bedroom with so much stuff that nothing else will fit. (You do not need to ask me about the garage.) This is not a problem limited to Macs! Try walking into any room and ask for a show of hands of all those who have too much empty storage space--computers, closets, anything. You have to either get more space, or you just waste an inordinate amount of your life moving bits and pieces around trying not to ruin or lose anything. 

If you do decide to get add an external drive, be sure to format it in either APFS format or Mac OS Extended (Journaled) format, like is discussed here:

Move your Photos library to save space on your Mac - Apple Support