Hold on. I reference money launderying before. So yes, I know of it. A way to make illegal funds appear legal. This has nothing to do with tax evasion but to hide where the money comes from. The newly laundered and clean money can now be used without worry about tracing a person's money to a crime.
To hide money or prevent money from being taxed, the best way is to not report it. Unfortunately this is also illegal. Why do people prevent their money from being taxed or try to lower the amount taxable?
To keep as much money in their pocket as possible. A fair tax system would allow just that. For you or anyone to keep as much money as possible whilst paying a fair share in taxes. A fair system that criminals would then call fair as well would be liked.
However, I don't see a fair stystem taking away a persons attempt to cheat the system. Just lower it to reasonable risk.
Also. No. I do not pay tax on someone else's bad reporting because tax system is not made to include missing money. You pay for what you make, no one else.