"Throughout most of American history, taxes were levied principally on consumption, rather than income.... In the Federalist Papers, Alexander Hamilton had this to say, 'It is a signal advantage of taxes on articles of consumption that they contain in their own nature a security against excess. ... If duties are too high, they lessen the consumption; the collection is eluded; and the product to the Treasury is not so great as when they are confined within proper and moderate bounds.' Hamilton was thinking here about direct taxes on consumption, such as the sales taxes levied by most state governments. He was right in thinking that there is a limit to such taxes. Experience shows that general sales tax rates much above 10 percent are very hard to collect. They encourage smuggling, black markets, evasion, production for personal use, substitution for untaxed commodities and other activities that erode the tax base." --Bruce Bartlett
The above shamelessly plagiarized from THE FEDERALIST
Think of the effect a change to a national sales tax might have on the American public and our economy. Not to mention the savings to the government in administration costs.
A national sales tax in lieu of a flat income tax would be very nice for the reasons you stated. Every taxpayer will be reminded of the tax every time he makes a purchase; it's a good reminder for him to vote for small government. It would also encourage families to teach their children to be industrious and to save money.
But, it seems almost impossible because:
1. the advocates for the poor will cry foul over the regressive tax causing some poor to go hungry
2. the tax rate would be far above the magic 10% (you quoted from the Federalist), above which tax evasion will occur. Sales tax is already 7.25% in California state (which has "progressive" income tax around 10%), plus up to 1% county tax. Assuming the federal tax costs much more than state tax, the total sales tax on goods might come out to 40-70%.
I assumed that the government maintain the current revenues, all income taxes were abolished (supposing 10% for CA and 21% for federal income tax), and most people did not spend their entire incomes only on purchasing goods)
3. double taxation is nearly inevitable on finished goods, if some of the supplies used were already taxed.
4. tax-and-spend politicians in Congress would never allow it because it might ultimately reduce the amount of revenue they get to spend. There's no initiative/referendum process for citizens to change the IRS system, so the only way would be to elect supporters of abolishment of income tax. (and that's hard)
If only it were a perfect world.