Eli5: Why do we tax public sector wages?


I’m in the UK but I’m sure the logic around much of the world is the same. It seems like an incredibly bureaucratic waste of money to tax public sector wages, rather than just pay the workers upfront what they would get post-tax. I might be missing something though, so hope someone on here might enlighten me if I am!

In: Economics

I work for a local government entity in the US. My employer cannot know what sort of tax breaks and credits I’m entitled to, so they can’t know exactly how much I would make post-tax. Besides, they can’t just hold onto the tax part of the paycheck for themselves, as I also owe taxes to the state and federal governments.

My employer does tax withholding, which estimates how much I will owe in taxes, and sets that money aside and sends it to the state and federal governments directly, but that’s what *all* employers do, so there’s no difference between public and private sector jobs in this respect.

1) It makes taxation simpler. People receive an income and pay taxes on that income. It doesn’t matter where it came from.

2) People often have multiple sources of income, these sources of income will change the tax burden in ways that are not proportional. In order to understand that, you need to understand progressive income tax rates. But imagine this:

Someone makes 50K tax free by working for the government. They also make 30K (taxed) by freelancing. How much tax do they owe? It get complicated.

3) Public service jobs are directly competing against the private sector for people. How does a person assess the value of multiple offers when they are calculated differently.

The further down the rabbit hole you go, the more issues you find.

Just because you work pulic sector doesn’t change that you have multiple tax situations that your public sector employer is unaware of. How many kids you have, how much your spouse makes, how much you paid in tax free interest on your house, how much you spent on medical costs, etc etc.

Because their pay isn’t the only things invovled in their taxes. You have deductible, they could have other forms of income, investment, are they married, have kids, etc. All of this is used to determine how much they owe to the governement as taxes. Not all this information is known by the employer of the person, even if the employer is the governement. So it’s better to threat them like anybody else.

There is no way for the government to know what tax exemptions you qualify for ahead of time. As such they cannot simply pay you what you would get without taxes. In the US you also owe taxes at the State, County, and sometimes City levels and so have to pay that as well. I assume it would be similar in the UK.