Hi tkc,
I am sure many cash actors cheat on taxes. It isn't really desirable that they get away with it. I am sure that many do. But I don't support your remedy because you are throwing out the baby with the bathwater.
To get a sense of perspective, my guess is the scale of the cash black market is small compared with, say, the network of offshore companies that large multinational companies use to conceal income. Wall Street is also a den of untaxed transactions which would yield a rich harvest if anyone focussed their attention there.
How to get a sense of black market scale? Well, the amount of cash in circulation at any point in time isn't huge relative to the size of the US economy. $1.3-1.4tn where GDP is $17.4tn. And the majority of USD-denominated cash in circulation is actually abroad. http://www.federalreserve.gov/faqs/currency_12773.htm http://data.worldbank.org/indicator/NY.GDP.MKTP.CD http://www.newyorkfed.org/aboutthefed/fedpoint/fed01.html
Taking into account the fact that cash is used for perfectly legitimate reasons by many folks (eg the sale of cannabis in Colorado), I doubt the US black market represents more than 1-2% of the economy.
The IRS ought to pursue black marketeers. But by another means than removing the circulation of currency.
There are plenty of legitimate and valuable uses for cash. We lose them at our peril.
What's so great about electronic methods?
As soon as you decide to let folks like credit card companies control the market, you end up with all the costs of that control. Differential pricing and access based on credit histories etc. Control of the things you are permitted to buy and sell. Additional transaction costs. Annoying advertising based on your previous behaviour.
Aside from which, the folks who want electronic tracking cannot provide online security.
I prefer to retain the existence of a medium for transactions a government and third parties cannot so easily control and/or track. I value my privacy and the flexibility of paper.
I don't much care that it's moving in the direction of trackable electronic transactions just so long as it never arrives!!!
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