You're right, of course, but "those in government" aren't a single entity. There's always an incentive for one corrupt part of government to take more than their fair share of the loot, and then for the next part to take more, and so on... until their combined cut is over the revenue-maximizing percentage, and they make less than they could have if they had coordinated better.

(I want to call this "the tragedy of the commons," but that phrase doesn't sound quite dark enough.)