"The tax on services will mean that many things will get even more expensive, like college education."
Incorrect - educational expenses are treated as an investment under the FairTax and are not taxable. Because education will be paid for with pre-tax dollars, it will be more affordable under the FairTax.
"Moreover, even things the U.S. Government buys, like office supplies and fighter jets will have that extra overhead attached."
They already have imbedded taxes in them and would continue to do so under the flat tax. The biggest difference is that the taxes that the government would pay would be more visible under the FairTax than under the current system - or the flat tax.
"They already have embedded taxes in them and would continue to do so under the flat tax."
The "embedded" taxes are, at most, very modest.
In 2003, the US federal government only collected less than $150 billion in corporate taxes.
All the "embedded" taxes in all the products and services provided in the United States, all summed together, cannot equal more than $150 billion
That works out to less than 1.5% of GDP.
Get rid of the corporate income tax (and I'm all in favor of that), and on average, costs of things economy-wide can only fall less than 1.5%, if that much (corporations may keep the additional profit to prop up long-term sagging rates of profitability).
Go look at the amount of taxes paid by firms who sell large volumes of stuff to the government. Boeing's corporate income tax rate is about 0.3%. Lockheed Martin's a hair over 1%.
Perhaps the government may pay $100 million less on a $5 billion aircraft carrier by eliminating the corporate income taxes "embedded" in the price, but the government is still going to wind up paying $6.36 billion for it, after the NSRT.
That's gonna leave a mark.