[overpaidgoogler]

While I agree with most of your points, I think the informal economy mainly exists for tax avoidance, and not because very short term jobs involve an onorous amount of paperwork. If this is correct, then those jobs would still exist in a cashless society, it's just that they would have to pay tax.

[brandonmenc]

> I think the informal economy mainly exists for tax avoidance

Garage sales and lending your buddy five bucks are also part of that "informal" economy. Without cash, the government would be dipping its beak into those transactions as well.

[tsotha]

That's the real reason they want to get rid of cash. They want to make it impossible for any economic activity to occur without the government approving and getting a cut.

I don't think it will actually work. Were the US to get rid of cash tax cheats and drug dealers would simply switch to GBPs, euros, or yen. Or drugs.

The only people who will be absolutely locked into the system are cubicle dwellers, but that's already pretty much the case.

[Retric]

The governent already ignores small electronic transactions as not worth the time to collect. I don't see how a cashless economy changes this.

[tsotha]

They used to ignore cash transactions for the same reason. The advance of technology makes everything cheaper, and sometimes that's bad.

[brandonmenc]

They ignore it now

[nmcfarl]

I think this depends upon who you are, giant multinationals have no problem filling out the paperwork for day laborers.

Some guy who want some help with his yard-work one Saturday, probably is just going to skip hiring a day laborer if he has to register with the state as an employer and fill out all the local, state and federal income tax and employment tax forms for a days work. Even if the amount of money to pay that tax is trivial.

I think the informal economy exists to avoid both taxes and paperwork. And for some things the cost of the paperwork is significantly higher than the cost of the taxes.

[dredmorbius]

Oddly enough, much of the formal economy seems to be based on tax avoidance as well: shelters, offshore payments/banking, Double Irish with a Dutch Sandwich, etc.

http://www.investopedia.com/terms/d/double-irish-with-a-dutc...

[ArkyBeagle]

That's not completely true. There are, at least in the US Sunbelt, large numbers of people who exist more or less off the books. It is only partially about tax avoidance. As the difference* between U3 and U6 unemployment has risen, this will only increase.

To the extent that funds from the above-board economy transfer to the informal economy, the taxes are simply paid by the last person in the chain who paid taxes.

*they're narrowing now, but it is anyone's guess as to whether the big jump from the 2008 time frame is permanent or not.