. I'm talking about new evasion/avoidance caused by the high sales tax rate. Some examples: personal use bought with business exemption, off-shore mail-order purchases, barter, legal foreign purchases, failure of seller to pay tax collected, etc.
All of which exists under the current tax system, and are used in evasion of income/payroll taxes.
Incentive under the income/payroll tax system to evade = 100% increase on the margin with nil chance of discovery (one person not filing is all that is required to evade the tax).
Incentive under NRST 40% increase on the margin with odds of detection increasing with customer volume, the profitability margin for evasion falls for any decrease in price enticing customers with a break on paying sales tax.
There is no reason to assume that non-compliance/evasion will be greater under an NRST as compared to the current system.
Also, as you have been informed, your evidence of currency in circulation is weak. The vast majority of that is out of the country.
The number of hands it passes through is the determiner of how a dollar counts for consumption or income for that matter. Dollars don't just get used once and disappear. They are counters in the flow of the economy the rate at which the flow from person to person is the determinate of the tax base.
Finance & Development, March 2002 - The Surprising Popularity of Paper Currency
In fact, surveys of domestic households and businesses can account for only 5 percent of the U.S. currency in circulation. Where is the rest, the other 95 percent? A big chunk is probably held abroad, though estimates vary wildly from 30 percent to 75 percent (my 1998 Economic Policy article estimated 50 percent). Even if the number is at the high end, say, 75 percent, that still leaves $2,200, held domestically within the United States, for every family of four. Economists presume that most of this cash can be found in the "underground economy." The term brings to mind gangsters and drug dealers, but, quantitatively, the underground economy consists mostly of small businesses and entrepreneurs (and their customers) who are avoiding various forms of taxation.
You want to take a stab as how many hands that money goes through in a year as well as barter in kind on top of that? Its anybody's guess as it looks to me. Those folks who actually are participating in an underground economy are not very likely folks who are going to be telling anyone just how much cash they move around in their transactions from hand to hand several time a year.
Which is essentially why GDP/NIPA and CBO will never have a number reflecting the full actual base of income or consumption, They only know of those lesser amounts that are actually tracible and hence accessible for taxation on which the tax rates, of necessity, reflect.
Thus any rate calculation based on the GDP/NIPA numbers is ground in only the accessible tax base, and is implicitly compensated for tax evasion and avoidance.