The federal government prints the cash that’s in your wallet. But one economist says that when Americans spend some of that cash, the federal government loses billions.
It’s all the money that changes hands, but is never taxed and never reported.
It might not be the most popular idea, however, Tufts University economist Bhaskar Chakravorti says collecting those taxes would go a long way toward bringing down the deficit. He’d like to see the government somehow get the taxes due on those transactions and put them into the treasury.
“We have anywhere from $400 to $600 billion dollars of uncollected taxes,” Tufts University Bhaskar Chakravorti says. “And even if you make the most conservative assumptions, and you say that one portion of that is due to the existence of a cash-based economy, we can say that the smallest estimate of that cost is about $100 billion.”
“I think that’s probably a fair estimate,” Mac Clouse, finance professor at the Daniels College of Business says. “It’s a lot of dollars. [But] it’s not just the fact that people are using cash.” Clouse notes that there is also no sales tax collected for many online purchases.