With few exceptions, all government purchases are taxed. So it is just not government salaries that get tax added on to them. There could be as much as $300 billion added to federal government spending alone because of the fair tax. Of course it is all just an silly trick to try to keep the fair tax rate artificially low. It is only a fool who thinks government paying itself actually raises money. Its like me paying myself $1 million dollars and then claiming I am $1 million richer. Totally fraudulant.
$300 billion ? Do you really think so ?
If we start with the $2.5 trillion the Federal government is currently spending, and we take away
1) entitlement payments ($800B)
2) Federal and military pensions ($300B ?)
3) block grants to State and local government ($600B)
4) educational and research grants ($100B)
5) probably other stuff that is not a "purchase" and is not an "employee compensation"
We get down to maybe $600B - $700B of Federal spending that would be subject to FairTax. So you might reach $200B added to Federal government spending.
Yes, the myth of government paying itself is a long-standing tradition. They could just not withhold income and payroll taxes from government employees, too. But then they'd need a different set of rules for any non-compensation income those employees have.
It seems silly to pretend those people are paying taxes, rather than just paying them less in tax-free wages. But it is simpler to pretend than to have a whole different set of rules for them. I don't think having an additional 60,000 pages of tax code would be doing anyone any favors. Better to pretend there is an extra $50B of revenue and an extra $50B of spending on those employees.