If there were no tax on gov't wages, gov't would choose to hire employees instead of contract to private.
Are you on this board telling people you want private contractors to be put out of business in favor of having government doing everything?
There is a time when hiring contractors makes sense and a time when it doesn't. Government shouldn't get into the business of manufacturing supplies or equipment, for instance.
But, I see no good reason for taxing government for hiring a janitor simply to provide a market for for companies doing that work as contractors, particularly if it ends up costing me more. That is not the best use of tax money, it promotes what the FairTaxers say they want to end - private sector influence in the pursuit of government favors, in this case contracts. Nor is it always more efficient.
Here's a real life example; I worked for a company that decided to dispense with in-house computer support and contract out, the support people were still located on site, but worked for the contractor. Before support was contracted out, when we had a problem we just walked across the floor, described the problem to the support person and he fixed it, usually within minutes. Once the contractor was in place, we had to submit a work order, that then had to be approved by the department head, who would then pass it on to the support person's supervisor who would pass it on to the support person. Talk about inefficient! The result was more forms to fill out and lost productive time.
When we needed to purchase new computers for the department, the contractor sent a guy out from Texas to spend a week in our department, observe and make recommendations. He was a nice guy, we enjoyed his presence in our department, he had no experience with what we did or the computers we used. Basically it was a waste of our productive time, and the company's money.
The private sector goes in cycles, a company may decide to contract out rather than hire in-house employees to save money. After a while, they decide its more cost effective and efficient to fire the contractor and hire in-house employees. If there were a clear advantage either way, I doubt it would cycle.
Actually, using my tax dollars to provide work for government contractors sounds kind of like pork.