Cashless: The Coming War on Tax-Evasion and Decentralized Money
Financial Sense— There are two major trends taking place that are shaping up as a recipe for disaster. On the one hand, we have massively indebted governments around the world desperate for tax revenues and, on the other, steadily growing multi-trillion underground economies whose main goal is to avoid paying them.
According to a recent study, the amount of uncollected tax revenues in the U.S. is estimated around a whopping 500 billion dollars per year1—enough money to bailout most of Europe.
At 8 percent of GDP, the underground or shadow economy in the U.S. is much smaller percentage-wise than other nations like Greece (25 percent), Italy (27 percent), or Thailand (70 percent)2, yet, given our overall size, America’s untaxed economy is larger than “the official output of all but the upper crust of nations across the globe…bigger than the GDP of Turkey or Austria.”3
Question is: How long will the government allow this to last?
When times are good and the economy vibrant, there is less incentive to crack down on tax-evasion; but now, unemployment is at all-time highs, income and property taxes have fallen dramatically, and the government is supporting an increasingly large and record number of people through a wide range of benefits.
Desperate times call for desperate measures
In an interview with Jim Puplava titled “Never Underestimate the Desperation of a Broke(n) Government”, world renowned economist, Martin Armstrong, cites numerous examples of how the U.S. is following a well set historical pattern where, inevitably, the “government is going to be much more aggressive to tax people, chase them down, and put them in prison.”
Just recently, noted author and blogger, Charles Hugh Smith, cited how California—a case-study for high taxes, regulation, and smothering bureaucracy—automatically seized funds out of a previous resident’s bank account for not filing taxes in the year 2006—five years after he had long moved out of state. In response to this incident, Smith writes, “What is entirely believable is that the state of California, desperate for revenue, is churning out dubious income tax claims stretching back years and collecting the money without due process.”4
If true, and these types of aggressive acts are to become more common, it should be fairly obvious that they won’t achieve the desired results. As taxes are raised, regulations and filing requirement made more stringent, more and more people will merely leave the system. Eventually, the government will have to think of a different way to collect.
We could change current tax laws and make it less burdensome but, when given a choice between simple or none, most people would rather choose none; and since many realize that by doing everything in cash their transactions are virtually untraceable, the risk of getting caught is quite tiny compared to the benefits of keeping much more of their income.
The only option left is to remove the very thing that fuels the underground economy in the first place.