Tell that to the FairTax people, they are the ones claiming that any income and payroll taxes are the property of the person who was paying them, not part of the businesses way to reduce costs.
What you are saying is logical, just like saying wage earners won't need the extra money because prices won't go up, so the business will keep them. But the 100% paycheck guarantee is in place, and once you extend it to the wage earner, you need to extend the same rule to personal taxes paid by a business owner on the profits of a business. After all, the business owner could just as easily structure all of his profit as wages, and be a wage earner for all intents and purposes, leaving zero profits.
I agree that your take is the way it was intended to work, but this is not the way the plan is being sold.
But nowhere in the book do they say that the employer WILL give the employee all the money that the employer was paying in taxes. In fact, they specifically discuss the payroll tax and talk about how this money is actually a labor cost that the employer calculates when determining how much to pay someone, but that it will be up to the employer to determine whether or not to give this money to the employee after the implementation of the Fair Tax. Their calculations are based on the employer NOT giving this money to the employee, as far as I can understand.
But, it's currently money that the employee doesn't see anyway, except in the form of retirement benefits. However, under the Fair Tax plan, those retirement benefits will continue to be funded at the current rate, so, in effect, the employee will be seeing the benefit of having that extra money paid to the government for them, even though it won't be coming from their employer directly.
The net effect to the employee is that they'll get 100% of the check that they've usually seen FICA, Social Security, and Medicare taxes taken out of. If there are employers who feel they can stay competitive and also feel that their employees deserve to receive that extra percentage, then good for them, and I'm sure potential employees will be climbing all over themselves to work for those employers.