It doesn't assume that individuals are 'rational'; it assumes productivity/efficiency of spending is determined by the spending's ability to fulfill individuals' preferences at the time of spending. In that sense, in the case where they don't give the money voluntarily to the government, however it spends it is by definition not the way they most wanted to spend it at that moment, hence is necessarily an outcome producing lesser utility to them at that movement then if they had spent it the way they most preferred to spend it.