At Feige has proposed what he calls "The Automated Payment Transaction Tax" to capture this activity, and he says that if 0.35% of all electronic transactions went to the government, all other taxes could be eliminated. According to The Transaction Tax, which advocates for Feige's proposal, this would mean that each time you pulled $100 out of an ATM, 35 cents would go to the government. It would make Visa (V - Get Report) and MasterCard (MC - Get Report) into our tax collectors. But you would have no more income tax, no more corporate taxes, no more sales taxes or property taxes. And no more forms to fill out.
Such a system might help companies repatriate some of the trillions of dollars in assets now thought to reside in tax havens like the Cayman Islands -- all without the necessity of an invasion, which I fantasized about last year. The point is, tax avoidance doesn't just hurt the tax man. It hurts investors and policymakers, denying us the data we need to know what's going on in the real economy. Bernard Baumohl of the Economic Outlook Group told James Surowiecki of The New Yorker recently that retail sales are currently where they should be with unemployment at 5%-6%, not 7%-8%. The difference is the gray economy.