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 ?
If you both bought and sold bitcoins through Coinbase and had realized gains (sold bitcoins for more than they cost), then the IRS would be able to identify that fairly easily. If taxes were not paid on those gains, they would would be able to go after you for the taxes due on those gains.
Oh, so do you mean people who trade and then finally retain their earnings in bitcoin ?
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).
Yes, that part I understand, but when you sell it the money will enter your bank account and you will anyways have some explaining to do then.