One of the things I find to be humorous about mainstream economics is the inclusion of government spending in the GDP metric. When government spending is included in this metric, it makes the assumption that government spending adds to the real wealth of the nation. Since “real” wealth translates into actual material goods and services that benefit humanity, which have been produced under the guidance of a profit and loss test by consumers, there is hardly anything the government does which meets the criteria of new “real” wealth creation. In the same vein, the taxation of income that comes from government jobs hides the destruction of wealth that is occurring when government spends money ..
Would it be possible for the state to only tax publicly funded jobs in order to pay for the creation of publicly funded jobs? .. Clearly this would be impossible .. resources must first be confiscated from private productive jobs.
Clearly it is ridiculous to tax a salary that is entirely funded from taxes, especially when one considers the administrative overhead costs that a payroll tax creates. The state could potentially shave billions from its budgets if it simply stopped taxing state employees and paid them a tax free wage. Obviously this begs the question of why does the state bother to jump through all the accounting hoops of taxing its own employees?
.. It does so to hide the fact that it is destroying resources. When the state taxes its own employees, it creates the illusion that state funded jobs are actually productive jobs. It hides the flow of money and resources streaming out of the private sector from the public eye and obfuscates the value of the jobs the state creates. If the state did not tax its own employees, it would be much more clear to the public just how destructive each new public job is to the overall economy.