If the tax is included in the price, then you’re getting less than $1 of the good or service as it’s already baked into that price. For example with a 20% VAT,

If the tax is included in the price, then you’re getting less than $1 of the good or service as it’s already baked into that price. For example with a 20% VAT, a $1 priced item is really an $.83 item, and to pay for it at a 45% tax bracket would require $1.81 of income. The numbers themselves are meaningless. Only the total ratio of income required to goods received is important, and it remains unchanged.