if you do not make any money, your tax is zero. therefore, no jail time and no need for dollars.
Also, it's not just taxes - there are tens of trillions of dollars of outstanding dollar denominated debt. Millions of people and corporations have contractual obligations to deliver dollars. If they renege on those obligations, their creditors will seize very real assets (buildings, houses, etc).
the fears are real for others. and to build an economy around solving these problems is interesting.
I believe now is a great time to think about alternate economies instead of holding steadfast to rules that govern the current domain.
Cash is a way to create trust between two parties that don't know each other.
Without cash, if I walked into Best Buy for a TV, I'd offer to trade goods or services for it. Since Best Buy doesn't know me from Adam, they have no way to know whether I'll make good on my promise (they can't trust me), and so giving me the TV is a risk. However, Best Buy probably trusts the US Government to continue accepting dollars for tax payments, so dollars are valuable and trustworthy. If I give Best Buy some dollars, they are immediately useful in paying taxes.
Likewise if I work for Best Buy, and there was no money, Best Buy would 'pay' me by providing everything I ask for up to a certain standard of living. I'd have to trust Best Buy not to abuse this situation. It's far easier to be paid in dollars, because I can trust that businesses I buy from will value dollars... because they can trust that the government will value dollars (for tax payments).
The only way to survive without trust (either the real thing or via cash, which is really trust in a third party), is for everyone to be totally self-sufficient. Specialization is a huge economic boost, so giving it up means a lower standard of living for everyone. However, if everyone were truly self-sufficient, there would be no need to trade goods/services, and hence no need for trust or cash.
If everyone just worked for non-profits focused on providing for people, that statement isn't true =P. Not exactly what you meant...
There's something wrong when 30% (soon to be 50%) of the population doesn't pay taxes, and expects the rest of us to provide for them, IMHO.
Welfare/Social Aid/Safety Net programs add value in the same way. By allowing an unemployed programmer to continue paying his rent, you prevent him from using his skills for evil. Or something along those lines.
Likewise, there is "the law of unintended consequences" where we are finding that people born into welfare tend to stay on welfare. For their entire life. And bear children in welfare. Obviously that cycle is a problem.
I think the safety net needs a through debugging and re-tuning to make it both more effective and more cost efficient. However, I still think its cheaper than the alternatives and their intended and unintended consequences.
The only way to not pay taxes is to live on donations from others (who paid tax on that which they gave you).
For example: property tax. Not everyone pays it, but many must. These people need dollars, so they are willing to do stuff for them. The stuff that they are willing to do provides the value of the dollar -- regardless of what the non-taxpayers think or do.