The same conflicts encourage some taxpayers to turn to black markets or to barter, much as other individuals seek to avoid slavery and conscription, becoming illegal fugitives if necessary (pp. 4.11:82, 4.11:88). As marginal tax rates climb to high levels, the underground economy becomes ever more lucrative. Since tax on such covert activities is more easily evaded, black-market income acquires a relatively high marginal utility to sellers. The increased violence, fraud, criminal aggression, and other dangers inherently associated with black markets have already been noted (pp. 4.11:20, 4.11:65-7).

Income taxation renders barter increasingly attractive. Since the monetary value of bartered goods is difficult to assess and since such transactions often generate no paper trail, it becomes extremely difficult to levy taxes upon income from exchanges of such goods. As we saw in an earlier subsection, the development of money, which enables individuals to maximize their utilities far more efficiently through a broader range of potential exchanges, is an indispensable feature of an advanced economy (pp. 4.6:30-5). The return to barter, which is a natural consequence of high income-tax levels, can be viewed as a reversion of that economy to a more primitive, less efficient state.