Have you considered using a cloth flag istead of plastic bag? You could start with the cloth then transition to bag - I get my horses off the range in MT and find that non-rattlesnake-sounding things are better.
What I have had success with is reducing the size of the area that the horse is in - We have permanently welded 12' x 12' 6 1/2' tall pens - The horse is free inside and the handler is outside. Our horses stand in those pens for a couple of hours every day - if not all day. It's good for a horse's brain to stand contained or tied for a length of time. So after the horse is relaxed standing on his own, I start the desensitization.
I start far enough away that the horse doesn't react to the bag (I don't want them to even look at me - I want to elicit no response). I wave it and make a lot of commotion away from the horse. I stop BEFORE the horse reacts and leave completely. If the horse does respond, it's a learned fear - much harder to deal with - but the next steps are still the same.
I leave the horse standing quietly. I go do something else then come back and do the same thing, this time I take a step forward so that I'm closer. I want to see a widening of the eye, a snort, etc - I don't want the horse to actually start moving in fear, but I do want the horse to show some of his natural instinct - I maintain that distance and let the horse sort it out. I don't stop after 15 seconds - sometimes I'll be waving a flag around a horse, pushing them, for minutes at a time. I look for the slightest relaxation at first, a tipped ear, lowered head, relaxed tail, a breath. As soon as there is a change - I stop and I give the horse a break from the scariness for an equal amount of time as it took to get that change. I'll stay at this stage for several sessios - the longer you stay here, the more likely you'll be successful.
After the horse has learned that the bag is not scary from a distance, I will approach the pen and increase the pressure. The horse will move their feet, they will kick, snort, buck, rear, try to climb out - or if you did a really good job and the horse was super comfortable with the previous step, the horse will pace around, face you, and then you'll stop and let the horse relax. Again the rule is the horse gets to rest for as long as you had to work to get a change.
The goal is to get to the point where you're sitting on the fence, waving the bag and the horse is unconcerned.
After the horse accepts the bag from the fence, you get into the pen with the horse. The horse will have a halter on at this point so that you can tur their haunches away from you. You have a contained area that will prevent too much speed - but watch yourself, this is a place that can be very dangerous for a person who is not 100% aware of their and their horse's movements.
You then introduce the bag as an aid - it means something, You use it to move the haunches and shoulders. In fact if I really hit a brick wall trying to get a horse to accept the scary thing, I just start using it as an aid much sooner and alot of times the horse will accept the bag because it's not just a scary thing, but a tool with a purpose.