You do realize the government is taking a hit for every person employed by the government? If Uncle Sam is paying you $50,000 a year and hypothetically you get taxed 25%, the government is losing $37,500 a year to employ you. So the government is not making any revenue by employing people.
It is increasing revenue when the private sector expands due to the infrastructure that government provided.
Do you think that our private sector would be as large and productive if we had never built the Hoover Damn, or the interstate highway system, or if we didn't have a military, or public education?
It's called "investment", and it's what allows our economy to expand.
That one $50k job directly created by government isn't the only job that results. Over time, that investment will result in lot's of job creation, the vast majority being private sector. Expansion of the private sector may not be in the same year that the public sector investment is made, but that's why we call it "investment", and that's part of the reason that our government borrows part of it's funding, just like most private sector companies do.
Point me to one country on the face of this earth that has a booming private sector that also has a government that doesn't create any infrastructure. Is it the Congo? Somalia? Where?
And yes, we had more deductions and loop holes, but the effective marginal tax rate was still far higher than it was today. How do you think we were able to afford expensive infrastructure projects back then? And the tax investment paid off for the rich, they became even richer.
Taxation is an expense, but business expenses are also investments, ones that increase the bottom line. When I purchase a new piece of equipment for my company, it's an expense, but that doesn't bother me a bit, as it is an expense that will increase my bottom line in the future. When I purchase advertising, it's an expense, but it increases my bottom line. When I pay an employee, it's an expense, but I make a profit off that employees work.
When BMW decided to build a plant a few miles from my business, the government provided them with certain infrastructure that they needed to make the plant viable. Without that, they couldn't have made the plant work. In turn, it's thousands of employees pay state and federal income taxes, and sales and property tax. Over time, this tax revenue far exceeds the initial cost of the infrastucture that our government invested in. The government even built a new bridge over the interstate, expanded our local airport (longer runways to accomadate air freight planes), built an "inland port" to check in shipments from Germany though customs, and ran an underground pipeline from a nearby garbage dump to the plant to supply them with methane to use for fuel. This plant is now the largest BMW plant in the world. Right here in the USA - imagine that.
Same with our Boeing plant, and our Amazon.com distribution centers. There was an upfront public sector investment, which has or will pay off many times over. Such investments can actually lead to LOWER taxes long term.
What it comes down to is do you prefer no government investment and lots of poverty/welfare/unemployment, or do you prefer government investment and prosperity?