Does being under leveled affect your damage

I am playing a level 65 storm call templar with 860 avg damage per lightning bolt. I have just smashed my way through the game up to merciless piety but for some reason I feel like I'm throwing rocks at her. Will this change in a few levels?

Piety just has a ton of health (and shield). There is no damage penalty for level difference.

Level has no direct effect on damage. It can raise your stats, which might lead to more physical damage or accuracy, but it will never straight-up raise your damage.

what about damage you take? do monsters higher level than you get some kind of buff against lower leveled players?

in poe you have to chose your weapons which, as a consequence, differ in effectiveness against some bosses and rares.
piety may take longer for you and people using chaos damage (esp. poison) or puncture may have it easier finishing the job but that's the way how it works, you always have the option to beat her in a party if you feel powerless against her defences.

probably old news to everyone, but what i've noticed is that the level of your gems starts being the most important thing, as they don't seem to keep up in merciless.