If the tax is included in the price, then you’re get 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.