Imagine that bitcoin becomes ubiquitous and instead of fighting it, government embraces it.

Every business is given a unique tax-id wallet and told that all of the business' transactions must be sent through this wallet. The government owns the private keys for these wallets and takes a cut (taxes) and sends the rest to the business' after-tax wallet which the business owns.

Tax enforcement is as easy as sending agents to make purchases and observing whether the transaction goes through the business' tax-id wallet. The government could also provide a public list of business names and their wallet-ids and make it a crime for anyone to purchase anything from them through a wallet other than these.

Bitcoin would then have provided the perfect means for government to control all economic activity.

Note: I'm a big fan of btc and only mention this in the context of preparing to avoid it.