It’s tempting to just say that we should pay government workers less and not charge them taxes. But I used to be a government worker, and I think there are three really good reasons to tax them just the same as us.
First, it reminds them of the burdens of supporting the very government that they work for. I don’t want any bureaucrat to be able to turn a blind eye to the costs of running the government programs that they administer. I know, if they are going home with the same amount of money in the end, it makes no difference, right? Wrong! Has anybody ever told you that the easiest way to save money is to have it taken out of your paycheck before you even get a chance to see it or spend it? Out of sight, out of mind. I think the same idea applies here. I want every government employee to look on their pay stub and see how much money is taken out in order to keep their offices and programs running. I want every government employee to file a tax return every year just like all the rest of us so that they understand the scope of what we all, as citizens, pay.
Second, it would hurt other governments and the rest of us. Most of us pay taxes to more than one government. If, instead of taxing government employees, we just paid them less, then they all would have less income. That means less tax revenue for states and cities. Think about this example: if a U.S. federal employee makes $30,000, they would have to pay about $4000 in taxes. (Ignoring deductions for a minute.) If their state tax rate is 3%, then they owe $900 to the state. But if we just pretend that they only make $26,000 (taking the $4000 in taxes out ahead of time) then as far as their state is concerned they only pay $780 in taxes. That missing $120 would have to be made up by the rest of us paying more, or by the state paying for fewer things like firefighters, police and teachers.
Third, there are some people who would be hurt by this plan. Some people have deductible expenses that are almost as much as their income. If you just pay them less, they end up with less money in the end. Let’s use that same $30,000 example, but now let’s say that they have so many medical bills, mortgage interest, and other deductions that they don’t have to pay any taxes at all. They get $30,000. But if we just pay them less, assuming that they “owe” $4000 in taxes, then they walk home with $26,000. This would penalize people who are serving us by working in the government, because if they were employed by a private company they would get to keep all of their hard earned income.
These are reasons why we should just tax everybody the same, even it means that we are taking money from one pocket and putting it into another. The number of people that we would have to hire to figure out how to solve these three problems would cost more in the end.