The (Modified) Fair Tax

So here's my thinking. Democrats like a progressive income tax rate because it's redistributive, giving money back to low earners, low taxes for middle class, and the highest taxes on the rich. Republicans like a flat tax because it's fair - everyone pays the same rate. For the same reason, they typically prefer a sales tax over income tax.

So here's my idea: A flat sales tax applied consistently across the board on the sale of all new B2C items (homes, cars, TVs, clothes, etc) but, and here's the important piece, with a monthly refund for every citizen. Why this works so well is that you can't say it's not fair. Everyone pays the same rate and everyone gets the same dollar amount check once a month. Republicans on board, check. But the refund check will be worth more to someone with a low income that someone who makes more. Democrats on board, check. And you eliminate corporate and all other taxes. Businesses on board, check. Who doesn't love getting money? Individuals on board, check.

So say the sales tax rate is 25% and the refund check is $300. Someone who spends $6000/mo on new items would pay $1500 and get back $300 - a $1200 tax bill in essence. Same spending with a wife and two kids would have a $300 tax bill. Someone who spends $1000/mo on new items would pay $250 and get back $300 - they come out ahead by $50.

So what are the benefits of this? Well for starters, it'd nearly eliminate the IRS. With no income tax, there would be no tax reporting, no complex rules, no cheating. You wouldn't be giving the government a tidy sum of intel on your personal financial situation. With businesses collecting the tax, there's fewer places for cheats or mistakes and fewer people to audit. You eliminate B2B and other hidden taxes so it's relatively easy to calculate what your actual tax burden is. You're redistributing taxes and helping out the less fortunate. You're taxing what you take out of the economy (new goods) and not what you put into it (labor - ie income). It's actually incentivizing working in fact. If someone wanted more money, they simply work to get it. There's no penalty. No situation where you'd lose government benefit XYZ or tax credit 123 because you input $1 more worth of your labor into the economy. Since it only taxes physical goods, the service industry would see a boon. And finally, it encourages the reuse and resale of goods which is great for the environment and is the most efficient use of those goods.

Now this works easily at a national level where all the inputs, outputs, and money begin and end within the country. Certainly, you'd have to consider additional scenarios such as imports (increased net price since the host country might be taxing their exports, labor, and raw materials in addition to the sales tax - not necessarily bad for us since it would discourage the export of our wealth and encourage more buying at home), exports (we'd be sending our labor and raw materials elsewhere, creating a burden on our country's resources that isn't resulting in any tax revenue - although the profits made from exports would eventually be used to buy new B2C goods within the US (in theory) so it would eventually show up), and money transfers (individuals and businesses would earn the money in the US and could spend it somewhere else to reduce taxes - we'd probably want to tax money flowing out of the country to make up for this).

So what do you think? Does this theoretical tax have any big picture flaws that couldn't be overcome in the details and constructs of the final law?