What TheRealMafoo talks about is a well known well studied principle, but the theories about why it happens are diverse ...
Personally, I think a large portion of it is based on the fact that the people who really pay taxes are the people without the ability to pass on the costs of higher taxes to others. Basically, if you impose a 50% tax on people who have power and influence (basically, people who earn more than $100,000 per year) they will either increase the price of their products or services, or reduce payments to their employees, in order to double their income so that their standard of living doesn't change as a result of a tax increase.
Now, the difference between the government spending this money and individuals is that individuals tend to act rationally and favour the most innovative and/or efficient companies while the government is remarkably inefficient; and even if they do contract to a private company, they still end up spending far more than retail price even if they buy products in massive quantities.
