As a small business, most likely sole proprietor, LLC, or S corp, Bob's Bakery pays zero corporate taxes. All profits are passed on to the owners and they pay personal income taxes on this money. Just like his employees, Bob the baker will need to be able to keep his whole paycheck and retain HIS income taxes.
It would be totally unfair to give Bob's employees a 25% increase in take-home pay but expect Bob the owner make do with his same old take-home.
as well as the slightly increased buying power (by your reconing) of supplies, like flower, milk, and eggs, as those suppliers will be able to slightly lower prices as well.
Not really, I assumed Bob's Bakery would see a 10% savings on all costs, the 7.65% that comes from savings on the employer half of FICA would only be saved on Bob's payroll expense, but I assumed that his suppliers would also save on their employer portion of FICA so I applied the 7.65% across the board to all Bob's costs. Plus I gave him the benefit of the doubts and added a couple of percent for IRS compliance costs, making it ten percent across the board cost savings.
And he wouldn't. He would keep his federal income taxes, "his portion" of FICA and Medicare, as well as the employer's portion. I don't understand the point you're trying to make here.