It should be tagged as "Client: Optional" instead, since it does not break clients, and in fact should be installed on clients if they play singleplayer.

Right now tools like packwiz interpret this as saying "this mod breaks clients", so they only install it on dedicated servers.

I think this is a flaw with packwiz then?

Modrinth states the following for client/server functionality:

This mod works in single player (the physical client), but only has functionality on the logical server.

It's probably better to contact Modrinth for clarification on this (maybe I will do that?). The meaning of "Unsupported" is clearer for the server side, since it's common for any mod that affects rendering (like Sodium or Embeddium) to break dedicated servers, due to them not containing rendering code, hence "Server: Unsupported" indicates they should not be installed there. For the client side it's less clear, at least personally I can't think of any mods that outright break physical clients. But in practice the current setting causes packwiz to misbehave so I'd consider this a bug.

Hmm nevermind Modrinth has a different idea regarding this.

modrinth/code#1416

Looks like they will be changing to a new user interface for this soon, with different values. So maybe this issue won't be relevant anymore then.