Since people using Coinbase would be buying bitcoins using their bank accounts, so how exactly would people be evading taxes here ? Wouldn't all that money earned that they didn't pay taxes on would have hit their bank accounts first ?
There's no need to buy. You can receive bitcoins via Coinbase. Selling them would then be a taxable event, assuming you're not just sending bitcoins to yourself (but you might have a hard time explaining that to the IRS).