Cashless: The Coming War on Tax-Evasion and Decentralized Money

http://www.financialsense.com/contributors/cris-sheridan/cashless-coming-war-on-tax-evasion-decentralized-money

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.

Cash becomes illegal

Consider Italy Intensifies Its All-Out War on Tax Evaders

In
addition to banning cash transactions, [Italy] has included an ad
campaign comparing tax evaders to parasites. There have been
headline-grabbing raids on stores, hotels and restaurants in affluent
Italian cities. For good measure, tax officials have also been stopping
luxury cars and asking drivers to show their licenses, then using the
information to pull their most recent tax returns.

Recently,
best-selling financial author and well-known investor, Doug Casey,
offered his perspective on this issue by pointing out that “governments
hate cash for lots of reasons…it costs a couple of cents to print a
piece of paper currency, and they have to be replaced quite often. As
the US has destroyed the value of the dollar, they’ve had to take the
copper out of pennies, and soon they’ll take the nickel out of nickels.
Furthermore, with modern technology, counterfeiters—including unfriendly
foreign governments—can turn out US currency that’s almost
indistinguishable from the real thing. And the stuff takes up a lot of
space if it’s enough to be of value. So sure, governments would like to
get rid of tangible currency. They’d like to see all money kept in
banks.”⁵

Italy or Sweden?

Aside from how
governments personally feel about cash, some societies are choosing to
abandon it voluntarily. As recently reported by the Associated Press,
cash only represents 3% of Sweden’s entire economy—a trend that isn’t
being enforced through law but rather embraced by a strongly
technological and innovation-loving people.⁶ No
“headline-grabbing raids”, automatic seizure of bank funds, or stopping
luxury car owners to check their most recent tax returns. Then again,
Sweden is also known for having the highest tax rates in the world.

Although
the total amount of money changing hands in America’s shadow economy is
quite massive, again, with respective to our total economy it is fairly
small—about 8 percent of GDP. Given the sheer convenience and
accessibility of electronic payment options almost everywhere you go,
the transition towards a cashless society is certainly “in the cards.”

However,
given the diversity of America’s population, our strong desire for
privacy and longstanding hatred towards taxes, there will always be a
strong demand for some form of cash or non-traceable
currencies—something I doubt the U.S. government won’t try to supervise
or restrict.

Resistance is futile. You will be assimilated

Given
the trends taking place, a hot or cold war against non-traceable
decentralized forms of currency is almost inevitable. Like Italy, the
U.S. could hit such transactions head on and declare them
illegal—although not without a massive uproar. On the other hand, the
government could take a more indirect and technological approach that
forces compliance overtime.

Specifically, we should expect to see
some form of the following if the U.S. made a goal of collecting the
estimated $500 billion in potential tax revenues:

1. Make cash transactions illegal
2. Merge all your information into one account and flag for any discrepancies between income and expenditures
3. Make
   it impossible to receive any form of government-provided or
   government-regulated assistance (Social Security, Medicare, health
   insurance, bank loans, credit, etc.) unless all taxes are current and
   accounted for

Obviously, if cash transactions were made
illegal it would be very hard for anyone operating outside the system to
freely exchange goods and services within the wider economy. However,
it’s very easy to transfer cash balances onto a stored value card and
then use that instead. Also, people could start using gold, silver, Bitcoins, or any other form of decentralized payment methods within various sub-networks.

For
the second option—merging all your information into a database—this
would further help in cutting down uncollected revenues but would also
require voluntary participation by most non-regulated providers of goods
and services. You would also expect to see a large number of costly and
intrusive audits for those operating businesses on a cash-basis.

The
last option—slowly making it impossible to receive aid, loans,
insurance—would effectively strangle the shadow economy into submission
and mitigate the chances of a revolution by declaring war on
decentralized methods of payment. Incidentally, I believe a very
eye-opening glimpse of what’s truly in the works was revealed when the
Social Security Administration released a report highlighting the Big
Brother right-to-access approach in conjunction with various other
government agencies.

Consider SSA seen going 90 percent electronic

The Social Security Administration has little choice but to move toward a goal of processing 90 percent of all transactions electronically in the coming decades, according to a new report adopted by an SSA advisory panel…

The “Re-imagining Social Security” report was published recently on the panel’s website after being adopted by the group at a meeting in May.

In practical terms, the full picture of SSA’s electronic processing would mean that hospitals would create an electronic medical record for each birth and communicate data about those births to SSA, which would set up a password-protected electronic account for each child.

Thereafter, as adults, people could log into their personal SSA account to verify information for jobs, name changes, widowhood, disability and retirement. Furthermore, SSA would communicate electronically with Medicare and with private doctors and hospitals to obtain patients’ medical information if needed for a disability or benefits claim.

The proposed birth-to-death electronic system described in the report does not exist. The envisioned medical data-sharing network is based on the Health and Human Services Department’s Nationwide Health Information Network, and the job-verification system is based on the Homeland Security Department’s E-Verify, neither of which is widely used [currently]. More spending would be needed to create the necessary systems and networks, the report states…

To serve the small percentage of people with complex transactions or those who are unable or prefer not to use newer technologies, SSA should look into creating joint service centers with other federal agencies, such as the Internal Revenue Service, the report states.

(emphasis added)

There
you have it: the merging of all your information (and money?) into one
easily accessible electronic file. Want to get Social Security or other
benefits? Apply for a loan? Get health insurance? You’re going to have
to be part of the system. Otherwise, except to hear from the IRS!

References

[1] America’s Underground Economy: Measuring the Size, Growth, and Determinants of Income Tax Evasion in the U.S.
[2] Hiding in the Shadows: The Growth of the Underground Economy
[3] America’s ‘shadow economy’ is bigger than you think – and growing
[4] Welcome to the Predatory State of California—Even If You Don’t Live There
[5] Doug Casey on Cashless Societies
[6] In Sweden, Cash Is King No More

Reprinted with permission.

2012-09-22 14:06:26

Source: http://themonetaryfuture.blogspot.com/2012/09/cashless-coming-war-on-tax-evasion-and.html