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For income tax purposes, employees of Governments and the like are taxed just like any other.

However, as it relates to certain other types of payroll taxes, like FICA (social security), and some other misc things: Some governmental employees are exempt from paying (or coverage) for this. Instead they are covered under very similar qualified programs and pay to them instead. (Teachers frequently have a separate set of programs for example, and being/paying to it, means they get excluded from the other more general one).

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