It's often said here that "companies don't pay taxes, customers do." Well, the same applies to governments: governments don't pay taxes, the governed do.
Looking at the problem from that perspective, all tax monies landing in the hands of the Federal government come from private sector individuals. Perhaps the best way to determine the full impact of the FairTax is calculate the rate that would be required if ONLY private sector consumption was taxed: State & Local governments paying FairTax raise the needed money from taxing the private sector and if S&L governments conform to the FairTax model, they too will derive their tax revenues from taxing private sector consumption. In the end ALL Federal FairTax revenues, would come from a tax levied on private sector consumption.
Working with 2003 data, the AFT determined that the FairTax tax inclusive, revenue neutral rate was 19.2% (taxing both private and public sector consumption.) If you shift the Federal FairTax burden to ONLY private sector consumption (as is done indirectly through S&L governments) the FairTax BURDEN on private sector taxpayers is as though the FairTax inclusive rate was 25%!!! (using the AFT's numbers and methodology)
Given the recent analysis by Kotlikoff which determined that the tax inclusive, revenue neutral rate for 2007 is 23.82% when taxing both private and public sector consumption, the BURDEN on the private sector after S&L governments pass on their FairTax burden to their private sector constituents is 31.5% !!! (this time using Kotlikoff's numbers and methodology.)
And remember, that is EXCLUSIVE of S&L taxes that fund current S&L budgets.
"... governments don't pay taxes, the governed do ..."
Certainly that is correct and has been so for - what - 6,000 years or so since the ancient Sumerians (or others ... maybe it was the Democrats) launched them since they figured out that without money, the government couldn't do very much. As I recall, they shortly also figured out that without the assent of the governed their taxation was one of many things that would cause them to lose their jobs (or their heads).
Aside from that interesting fact, your analysis is merely doing what Gale, Bartlett, RobFromGa and a few others have attempted to do - artificially shrink the FairTax base so that the FairTax rate would appear preposterously high. Gale even once built things up to a 94% rate (while Robbie slacked off at 50%).
If you're going to analyze the FairTax then needs be you must analyze the bill as written ... hmmm, in fact that little stunt of changing the bill to suit your own purposes and then analyzing the result is just what the Presidential Tax Panel did (among other mal functions).