The taxman givith, and the taxman taketh away

As I was filing our taxes the other day, I pondered the tax system. Let me say first, the IRS is not the agency I want to fuck with. They don't scare me, but they make me uneasy, because one mistake and those guys will be on you faster than an angry loan shark. So, I respect their authority and do what I'm told, so to speak. If you work for the IRS, please don't audit me. Anyway, I was thinking about the dollar, and the way we're taxed. I have this theory that every dollar is eventually taxed out. Follow me on this journey, walk with me here...
I make $1.00. I use that dollar to buy something, and pay tax on my purchase. Let's say sales tax is 8%, so 8 cents is tax. (For those of you that flunked basic math) The store then has to pay tax on their income, so more of the dollar is gone. Another portion of the dollar goes to the company that manufactured the goods, and they pay income tax on it as well. Yet another portion of the dollar goes to pay Sally, who works at the store, and Jane, who works at the manufacturing plant. They both pay income tax on their part. Everyone in the scenario (except me, because I spent my whole dollar) then goes on to use their portions (after tax) to purchase goods, and pay tax on those. The cycle continues, until eventually there is nothing left of the dollar, the taxman has it all. Make sense?

**All of this is without taking into account tax brackets, shelters, and refunds. We're just talking basics here, so please don't jump on me about the politics of it all.**

So, logically, it can't possibly happen like this, but it seems like it must. After all, I pay taxes on income, taxes on the things I buy with the income, and so on. So, for those of you who majored in economics, can you give me some insight here? Sure, I should have paid close attention in school, but then what would would I blog about?