[First, there is no difference (other than one you contrive) between an employee and a self-employed businessman. Both get compensation from their activity in the business sector; both pay wage taxes; both pay income taxes as individuals. To suggest that some fictitious difference is a valid reason to expect a self-employed businessman to relinquish a portion of his gross pay that his employees do not relinquish is patently unfair, not to mention unsupportable.]
To which I obviously disagree. There is no reason to treat two business owners differently. A man who runs his own business has made a choice to actively participate by being an employee. Another man may choose a passive role and hire a manager to run everything. Obviously, he would not pay the manager the full profits from the business. Just because owner & manager are one person does not mean you can toss out the logical and economic distinction that there are two roles being filled.
A 'fair' expectation for an owner/manager is that he retain the portion of PIT and Payroll taxes as the equivalent employee would, and retain the net profits that the owner would. To retain the owner's PIT would be double-dipping as compared to the other owner who had hired an employee to manage things.
Certainly your observation is correct about the business owner, but the FairTax opponents cannot agree to this as it throws a monkey wrench in their carefully skewed calculations.
The owner has this situation precisely because of his choice to not work for someone else for a living but to get the big bucks that automatically come (yeah, right!) from owning a business. That upside potential (realized or not) is why the owner is never promised a rose garden because of owning the business. He has lots of opportunity however that also includes the opportunity to not do well.
In fact the owner is in a position to take advantage of the increased economic activity afforded by the functioning of the FairTax. This presumes, however, that the owner has the mental/emotional wherewithal to take advantage of those opportunities and not sit around whining like some on these threads about how they think the FairTax will do them harm. If that is their concern, perhaps they should be working for a paycheck instead of owning the business.
Heck, even the absentee owner can choose to keep the PIT portion of his profits ... that's his income. Isn't he entitled to maximize his purchasing power? If he gives it back as price reduction, his purchasing power declines substantially!
The problem with your thinking is that for the FairTax to work as advertised, EVERYONE has to agree with you AND all situations have to be alike. EVERYONE has to subscribe to your code of fairness and ALL situations demand uniform behavior. EVERYONE has to forgo their profit motive so they can be "fair" and ALL situations have to maintain a constant "percent of disposable income" outcome.
That just won't happen.