Only to the point where the IRS audits you for spending significantly more money than you earn. Drug dealers and organized criminals get caught for this very problem concerning undeclared cash.

That's true, if you have a ferrari and declare minimum wage income you'll have problems though there are many less conspicuous ways to spend/save/invest the money.

You would certainly get a significant rise in tax evasion. I'm not actually convinced that's a bad thing overall (though I'm not inherently anti tax). If it brings tax schemes previously only available to the wealthy into the hands of commoners.

Good point. But even if you reveal ownership of any bitcoins "as soon as you have to" (oh yeah I sold some consulting overseas for 100 BTC ...), and pay the taxes on them, it still functions as a great way to protect your savings against inflation-happy governments, in a way that commodities and "inflation-protected government bonds" can't.

Ask any Argentinian if they'd like to have kept a stash before the Corralito.