There are legitimate reasons for wanting privacy/anonymity. Not everyone who uses a tumbler does so to evade taxes or launder money.

I think it would be better for plausible deniability to just use a coin that has default privacy built-in. That way no one can point to the fact that person went out of their way and spent money (transaction fees) to attempt a measure of privacy.

Using bitcoin to purchase goods and services would be a taxable event, but is there really a clear case that using a tumbler is a taxable event? On what grounds?

I think their arguments is you went say eth->btc and then through a tumbler, they would be able to charge you for tax avoidance on the eth->btc (assuming you didn't declare this and pay the tax) and then money laundering on the tumbler because it was meant to obfuscate that.

Read a couple of tax court rulings, IRS embarrasses itself all the time on overzealous stretches.

With non-reporting the IRS doesn't know how a taxpayer is categorizing a transaction. They wouldn't know if a transfer was a payment for a good/service with a capital gain or less required, or if a transfer was collateralizing debt to a third party that manages their collateral however they want which would not be a tax event, for example.