LET’S ELIMINATE CASH
An attorney completed a last will & testament for a kindly old lady. She paid him with a crisp new $100 bill. After she left, the lawyer noticed there was another $100 bill stuck to the first. The counselor was in an ethical quandary – should he tell his partner? Undoubtedly that cash might never be reported to the IRS as income for tax purposes either.
Paying for and accepting cash as payment for goods and services is now a smaller part of our overall economy than ever in history but it still accounts for billions of dollars in transactions. Thanks to debit and credit cards, checks and e-checks, electronic and internet payments, and automatic deposits, we now just move numbers around between various accounts.
However, too many of the transactions, people and entities that operate principally on a cash basis are part of an unregulated, untaxed, underground economy that includes all types of criminal activities. If we really want to have complete transparency and honesty in our society and economy, we have to be able to follow all transfers of money, goods and services through objective financial accounts. Cash is the last bastion of secrecy and protection for criminal enterprises and legal businesses that do not wish to disclose their actual incomes.
On a date certain, we should simply outlaw the use of cash in the United States. All hard currency in paper and coins would have to be deposited in some regulated banking or financial institution before that date. That may shore up the balance sheets of some U.S. banks teetering on insolvency. All outstanding money not so deposited would be deemed worthless and no longer legal tender after that date. The U.S. Treasury could impose a one-time deposit fee based upon a percentage of the total in order to capture prior lost income taxes. That would provide one last safe-haven for these cash depositors who would not really want to explain the origins of the cash and would rather just pay the fee (tax) to put it all behind them.
Everyone would have to use checks, electronic transfers and debit and credit cards for every personal and business transaction. All vending machines would no longer accept cash. ATM machines would be used only for making deposits of checks and to verify account balances. Since other technologies can easily handle those transactions, ATM machines and their fees might just disappear. That could be the public’s revenge against all those greedy bankers.
Sole proprietors of businesses may have to purchase portable card readers to accept debit and credit card payments for the convenience of their customers. Any fears of non-payment would be eliminated by current technology immediately confirming a transfer was made between financial institutions. The readers can also read checks and run them through the appropriate banking institution that electronically uses the Federal Reserve check clearinghouse system.
The result of a cashless society would be to require every payment for goods and services to be recorded and traceable. It would put a massive impediment in the activities of many criminal enterprises that depend upon cash for their operations. Even legal businesses would no longer be able to hide income payments via cash. Money laundering schemes would be rendered far more difficult because there could no longer be unidentifiable cash deposits into legitimate businesses; Any transfer into a bank account would have to be traced to another.
Some illegal activities, such as prostitution services and marijuana sales, might have to be fully legalized, regulated and taxed. Perhaps private betting and gambling would also have to be accommodated and legalized. However purchases and sales of illegal drugs such as heroin and cocaine, or for other blatantly illegal activities such as political bribes may have to be reclassified by those involved. However, if every transaction were recorded by at least 2 financial institutions for governmental inspection and possible taxation at any time, a massive challenge would be presented to our large shadow and illegal economies. Bartering might be an alternative but few people have tasty farm produce with which to pay their attorneys and other creditors.
This change might require marriages to maintain far higher levels of honesty and disclosure between partners than ever before. Every financial transaction by each spouse would be readily ascertained when the statement is viewed online or after its receipt in the mail. Of course any married person even objecting to the elimination of cash might cause a spousal inquiry into the underlying motives behind such opposition. What to do with eBay and PayPal is another ancillary consideration. A person might send the statements of a secret account to a post office box but the government would still be able to find it even if a spouse might not.
Some illegal businesses may have to get creative on their descriptions of services and goods but eventually they will be found out since every transaction will be recorded by at least 2 financial institutions. Former NY Governor Spitzer paid for his prostitutes with wire transfers to the offshort account of the escort service. (Still his wife was oblivious to his activities.) It took unrelated criminal investigations on the legality of the underlying online escort service and a separate bank inquiry in his wire transfers. Prosecutors were forced to corner Mr. Spitzer with the obvious connections. He admitted he was a client of that escort service, much to the surprise and chagrin of his spouse. Perhaps if he had used cash, he might still be Governor.
In order to address our serious federal budget deficits, we will need to find many new activities to tax and better ways to trace the large underground economy so it also becomes fully taxable. The only way to solve both issues and eventually force everyone to be more honest and transparent about everything they buy, sell, and do, would be to eliminate cash completely from our economic system.
3/26/09 by Marc Pascal in Phoenix, AZ.
15 Responses to “LET’S ELIMINATE CASH”
So, assuming this is not a joke or irony, your basic premise is that every single aspect of an individual's spending and income, and by default just about every aspect of their lives, be monitored and fully accessible to the government?
And people thought the Patriot Act was onerous.
Should people be allowed to keep secrets? I think almost everyone would say yes, but maybe that isn't really what's best. This is a very big picture question, and one that I hope will not be resolved in my lifetime.
I am confused. Legalizing said criminal activities would seem to obviate the need for the tracking every financial transaction.
Anyway, this is insanely Orwellian.
It seems naive to think eliminating cash will stop illegal transactions since people can and do write whatever they want on an invoice or receipt. I am more inclined to support government collection efforts through consumption and/or value added taxes at the point of sale. Cash is a good thing, especially if one is trying to develop fiscal discipline. Instead of using plastic spend a week using cash instead. Luxuries seem less expensive when all you do is swipe a card. Conversely, pull some big notes from your wallet to pay for that HD flat screen and the expense hits a little closer to home. Banks know this fact. Have you seen the credit card TV commercials where the guy at the check-out line pays cash and holds up the whole sneering line of people with their charge cards? Banks know you're more likely to buy more of whatever the less you think about it , and of course that means you're more likely to have a continuing balance accruing interest for them. Cash holds immediate visible, tactile value. Plastic rectangles with pretty names in people's wallets are easier to marginalize, which is the way they like it. Long live cash!
Far worse than government, think about all the slicing,dicing and marketing that Corporate America already does and will do with all this information.
Dick Gregory, the 1960s comedian, proposed a way to solve illegal transactions. Declare that a script exchange would be done on a certain date, new dollars for old. The catch was simple, if you presented more than $10k cash for exchange, you had to show how you came by the money. Explaining stacks of hundred dollar bills would go a long way in trapping ill gotten gains.
One nit to pick. The lawyer story at the beginning; why was his ethical dilemma if he should tell his partner? Maybe returning the extra hundred to the old lady would be a more appropriate action, but then again, I'm not a lawyer.
Good morning everyone and thanks for the variety of great comments. I post because I want to elicit new thoughts from people – I don't even have to actually believe everything I write. I am often trying to develop new ideas and blogging is one way to that end.
As far as the lawyer joke at the beginning, the correct answer is that he should return the money to the client. The problem is that he doesn't consider that simple ethical issue and is willing to not tell his partner about the extra $100 that he should split. I was a former attorney and I had to hear ethics issues and some were very destructive. The story exposes multiple small ethical errors and is part of the greed that permeates our economy and society.
I don't think the idea is Orwellian. What remains of cash transactions are many small ones and those that involve nonreporting of income or criminal activities. Everything we do is tracked – on the Internet, by employers, by banks, by merchants, etc.. I am more concerned about my privacy in my personal affairs and dealings – my financial activities are probably less exciting.
I use very little cash but a debit card instead. I agree that using cash might be better to see how money is spent and I deleted a paragraph on that point before posting this blog. Many years ago, my father decided to bring home his paychecks in cash form for a few months and we as a family divided everything up on the kitchen table to pay all the bills. I learned a lot from that and can live very frugally but just via written budgets and tracking my bank statements. Part of our country's overspending and excessive leverage problem stems from the fact that we no longer watch our money.
The idea of taxing all the turned-in cash was a way to recover likely lost income taxes in prior cash transactions – similar to the 1960's Dick Gregory proposal. Even if they were legalized, prostitution and marijuana plus other activities, they would join the ranks of businesses that prefer cash so they would underreport their income since cash is not traceable. By not printing paper money and coins, the Treasury could save a significant amount of money. I prefer using my bank accounts via Quicken or Quickbooks to track income and expenses. Most all my clients pay me via business checks. I would prefer a simplified tax system that has low rates on gross income and relieves everyone from all the detailed expense disclosures to get credits, deductions, and pay on net income. Once the government gets some reasonable percentage of gross income, how we spend the rest is our own business.
For those worrying about governmental and private business intrusion – it already exists to an extent that is very frightening. We have already given up our privacy and it won't be reversed. I cannot see putting myself up on youtube, my space, and other web sites. You have no legal obligation to give any clerk in a store your phone number, zip code or anything else about yourself when paying for an item by any means, check, credit, debit or cash. Yet people give up that information voluntarily.
If you really wanted to maintain your privacy and secrecy, you would not use banks, credit cards or debit cards but only cash. You would not incur any loans or debts. You would rent your place under a fictitious name or a business name. The moment you sign anything, you are in the system and much goes to public records.
The government already has alll the information it needs because it has access to your banking records since all banks must report interest income, large transfers and cash deposits over certain amounts anyway. This proposal was meant to bring everyone who avoids income taxes into being taxed. The vast majority of us cannot hide income if we get checks, 1099s, W-2s and the rest. I am trying to make the others pay their fair share too.
Thanks and best wishes, Marc Pascal in Phoenix, AZ
Marc – they have no record of cash transactions, cash not deposited in the bank, barter transactions, etc.
And it is so Orwellian that I cannot believe you try to deny it, and with a pitifully weak defense at that – 'they already get a lot of information on you, so lets force everyone give them ALL information'.
No thank you.
Soooo, austinroth, what are you trying to hide??
That's true. Cash transactions are not recorded and can escape taxation. State Governments ultimately get a piece of that cash only economy because everyone has to eventually buy food, stuff and other matters with the cash in your pocket. You could itemize all your sales tax receipts and try to get the deduction on your 1040 but you might open up a whole can of works if your total sales taxes reported on items purchased far exceeds your stated income.
We passed Orwellian society in this country not long after 1984. But it's not just government but big business that has the “good” and info on us – and a ton of info on everyone – some of it may be incorrect but it's a ball and chain around your head – particularly with respect to your 3 credit reports. I am not asking to provide the government with all the information on each person – just the financial stuff. The rest requires a warrant but with legal changes during the last administration, merely be charged with being a terrorist permits unlimited searches and seizures.
Our right to privacy under current laws passed by Congress and interpreted by the Supreme Court are very limited today. What's left is probably what fun you may engage in the privacy of your primary residence. It also includes what you tell your attorney, spouse, doctor and spiritual confident (priest, rabbi or minister) so long as you know they are acting in such a capacity. You don't have any expectation of privacy giving information to your accountant, your business partners, your co-workers, your friends, relatives or lovers. If you dump yourself out there on the internet, you are just asking for it. If you walk or drive around in the world (outside your primary residence) you have very little expectation of privacy from being photographed, identified, x-rayed for security purposes, frisked down and stopped by police checkpoints, or being recorded by thousands of new private cameras in businesses, stores, malls and the rest. To remain an employee at many locations you must agree to submit to random drug and alcohol testing. A woman's right to handle an unwanted pregnancy depends upon 50 different state laws and for a long time under the Bush years permitted pharmacists from providing the morning-after pill because they did not think it was ethical. Not only do we permit government intrusion, we allow other private citizens to dictate how we can operate and live in this world. The list goes on and on.
To simply argue that those who do not want to disclose their true income for tax purposes, should be legally compelled to do so, does not anywhere go as far as what goes on now in the name of both private business and public governmental security interests. I am not even compelling people but merely eliminating the last method of keeping that underground economy operating: cash.
Thanks again and hope to hear from you again – Blogger Marc Pascal.
Please think about the entire issue in its entirety and separate a cashless society (which most people and businesses now operate) versus all the real intrusions into our privacy to which we are already subject. They are completely different.
Marc – sorry, but your position only makes sense if you are OK with the current intrusions, and therefore willing to give up whatever remains. You can make whatever arguments that you want about the state of things, but in the end you are falling back on 'if rape is inevitable, lay back and enjoy it.' In fact, you seem to be taking it the next level and saying 'actively encourage it.'
What I have to submit to I do only because I don't like the thought of sitting in jail (no bad puns about my rape comment, please), not because I accept it willingly.
As for what I am trying to hide, none of your (or anyone else's) damn business!!
Sounds a little familiar… From Revelations 13:
16 And he causeth all, both small and great, rich and poor, free and bond, to receive a mark in their right hand, or in their foreheads:
17 And that no man might buy or sell, save he that had the mark, or the name of the beast, or the number of his name.
18 Here is wisdom. Let him that hath understanding count the number of the beast: for it is the number of a man; and his number is Six hundred threescore and six.
“that no man might buy or sell, save he that had the mark”
Whenever this happens there is one thing I think we can all agree upon: Cash has been Eliminated.
Well… I'm a big science fiction fan and love the idea of electronic transactions… But when it comes down to reality I don't like this invasion of privacy, particularly when we see how governments and companies will abuse the information.
Besides, there's nothing like a nice crisp $100 bill in a Christmas card.
When people suggest to me that “If you've done nothing wrong you shouldn't have anything to hide” I always ask them there and then to let me go through their wallet. In the extremely unlikely event that they are prepared to do so I then proceed to analyze it's contents with an eye toward incrimination I'll take out a restaurant receipt and ask if he's aware that that particular establishment is a known meeting place for suspected terrorists, or that its owner has given money to a suspect charitable organization. A couple of observations in that vein are usually enough to make my point.
Normally… when I come across something extremely idiotic on a blog I read alot, I would give a long… well thought out answer as to why.
But, my god man… this idea is so amazingly stupid I'm stunned. This isn't even Big Brother bad… its like Humongous Brother… Leviathan Brother even.
I completely agree with eliminating cash from our society.
The tax base would increase by billions of dollars as the underground cash flow was tracked and taxed using existing laws.
The implementation is actually quite simple. Devise categories for transactions (i.e. business to business, person to business and person to person). Set limits on person to person and tax every dollar after the limit has been reached.
Imagine the revenue from payroll taxes that are lost to cash transactions, or the sales tax on illegal drug transactions (these should remain illegal).
Illegal immigration is no longer an issue as it would be almost impossible to earn money under the table (require a social security number for all payroll transactions) the illegals would simply go back to where they came from as the cash dried up.
This is a no brainer, solve the drug problem, solve the illegal alien problem and grow the tax base.
Why with the extra tax revenue you could even fix the healthcare issue because everyone would be contributing (emergency rooms would not be closing due to non payment).
If our government wants to fix this they could, it’s simply a matter of whose pocket gets lined and because no special interest is funding the cause this won’t happen.
If you’re worried about the collection of information about your personal spending habits your to late. Every purchase you make is tracked already if you are using Rewards cards (every store has one) when you purchase groceries for example or when you use your ATM card or credit card, it’s all tracked.
I for one have nothing to hide and everything to gain by forcing others to pay up and contribute to this great country.