Harvard Economist Proposes Eliminating $100, $50 Bills To Inhibit Tax Evasion, Crime

Many Americans rarely carry $100 bills. Nonetheless, it's been estimated that $100 notes account for roughly 78 percent of the cash in circulation; this means that, out of the $1.38 trillion that exist in paper dollars, $1.08 trillion come in the form of $100 greenbacks.

So, where are these banknotes, and what are they used for?

Several studies have suggested that, given the difficulty to track cash, $100 bills are largely used for illegal purposes, from bribery to drug dealing, and from undocumented employment to tax evasion. This is why Harvard economist Kenneth Rogoff believes getting rid of $100, $50, and maybe even $20 notes, will make a big dent in crime and tax evasion, while having very little impact on the legitimate, legal economy.

Rogoff explained his hypothesis in a new book called "The Curse of Cash." Shortly after its release, Vox’s Timothy B. Lee had the chance to chat with the expert and ask a few questions.

“A big chunk of the cash that the US, the eurozone, Japan, other advanced countries have printed is floating around in the world underground economy. It’s facilitating drug trafficking, human trafficking, extortion, money laundering. It also plays a role in illegal immigration,” Rogoff explained. “My recommendation is not to get rid of cash. It is not to go to a cashless world. It's to get rid of the big bills, which don't have an important use in normal transactions. And I propose doing this very slowly over a long period.”

Just in case the idea comes with some adverse effects, the economist proposed protecting low-income people by giving them debit cards.