No Business Like Shvo Business

 The lights of Broadway have long shone bright as the show business capital of the United States. (Hollywood may have the movies, but it's just not the same. And Vegas? Puh-leaze.) New York theatres attract millions of visitors and billions of dollars every year. Naturally, sharp New Yorkers have co-opted show business tactics to promote all sorts of unrelated businesses. So now, we have fashion-as-theatre, restaurants-as-theatre, and even real-estate-as-theatre.

Michael Shvo may be the most theatrical real estate guy of all. He started out as a brash Manhattan broker, squiring buyers in a chauffeur-driven limo and trademarking the slogan, "Let's Shvo." He enlisted celebrity designers like Giorgio Armani and musicians like John Legend to help sell showy condos to showy buyers. Now he's reinvented himself as a developer, with current projects designed to make everyone else's projects look like college dormitories, or maybe Soviet-bloc worker collectives.

Shvo is also a noted art collector who favors paintings by Andy Warhol and sculptures by Francoise-Xavier and Claude Lalanne. He paid $14 million to combine two 68th floor condos overlooking Central Park, then stuffed the resulting 4100 square feet full of treasures. (The living room rug is beaver fur.) He dropped another $6 million on an all-white Hamptons house to stuff with more treasures that wouldn't fit in the Manhattan pad. And he's currently developing a 50-acre private island resort in the Bahamas.

So we know that Shvo likes buying showy stuff. It turns out, though, that he doesn't like paying tax on it. Back in 2016, Manhattan District Attorney Cyrus Vance, Jr. indicted Shvo on 28 counts of criminal sales tax fraud. And on April 26, he plead guilty to two of those counts. "Michael Shvo's brand of tax evasion was an art form unto itself," said Vance. "Through ornate ruses — like creating a sham Montana corporation to avoid taxes on a Ferrari — the defendant dodged more than a million dollars in state and local taxes."

Shvo's favorite ornate ruse involved a Cayman Islands company called Shvo Art, Ltd. He told the galleries and auctioneers who sold him art, furniture, and jewelry that he was shipping his purchases to the Caymans, where there would be no tax. Instead, he sent them instead to his Fifth Avenue office or one of his homes.

As for the Ferrari — a 458 Spider that stickers at $230,000 — Shvo set up a Montana LLC to buy it and register it. But he actually drove it in New York, which made it subject to the Empire State's use tax. (Montana has no sales tax and lets LLCs register vehicles, which makes the "Montana license plate scam" a favorite for high-end vehicle buyers. Of course, the rest of the states generally fail to see the humor in that move — California even has a special website for ratting out vehicles with out-of-state plates.)

The guilty plea calls for Shvo to pay $3.5 million in taxes, penalties, and interest. But something tells us he's not particularly worried about his sentencing, scheduled for June 7. After copping his plea, Shvo and his wife, a Turkish actress and model known for her vast collection of one-of-a-kind Barbie dolls (including one dressed by designer Christian Louboutin), left court in a $400,000 Rolls-Royce.

We tell quite a few stories here about celebrities who don't seem to understand the difference between a "tax plan" and a "felony." Sadly, the moral is always the same: you don't have to cheat to pay less. You just have to call us. So what are you waiting for? The curtain is ready to rise on real savings! 

This Will Make You Love the Income Tax. . .

We Americans have fought with our internal revenue code since 1913. But slicing and dicing income, deductions, and a dizzying array of business and personal credits is hardly the only way that Uncle Sam could raise the money he needs to pay for guns and butter. State and local governments also use sales taxes, payroll taxes, property taxes, excise taxes, and "gross receipts" taxes to fill their hungry coffers, too.

And then there are the more exotic taxes, the kind that sometimes live only in philosophers' heads. The nineteenth-century economist Henry George argued that a land-value tax would raise wages, improve land use, and eliminate taxes on economic activity. More recently, economists and politicians have proposed carbon taxes, consumption taxes, and European-style value-added tax alternatives.

Here's one you probably never considered. Earlier this month, a Duke University philosophy PhD candidate named Erick Sam took a microscope to the concept of an "endowment tax." This is a vaguely Marxist tax on "a person's potential earnings, which can provisionally be thought of as the maximum income a person could earn or could have earned over a given time period." (Yikes!)

Sam opens his paper by asking how we determine a person's "ability" in the first place. He acknowledges that we don't "inhabit a reality where endowment is readily apparent," then goes on to consider standardized test scores, genetic capabilities, and educational achievement as proxies for ability. He even mentions one proposal to impose a "privilege tax" based on the income your parents earned during your childhood!

Now the fun starts. Sam walks us through the utilitarian considerations of an endowment tax, and how it counters the "substitution effect" that income taxes impose on the desire to work. "Distributive considerations are only instrumentally relevant to this calculus, since different distributions will tend to be correlated with distinct aggregate utilities." (Well, duh???) He goes on to address the Kaplowvian argument for endowment taxation as the ideal Haigs-Simon income tax, where "income" equals consumption plus all accretions to wealth over a given period of time. (Huh?) 

Next, he drags us kicking and screaming through a dense swamp of non-utilitarian considerations. These include Shaviro's deontological argument for endowment taxation rooted in the theory of luck egalitarianism, Stark's libertarian challenge to Rawlsian arguments favoring the priority of liberty, Markovits' algorithm for balancing endowment taxation with talent slavery, and Dworkin's auction and insurance scheme for eliminating inequality. (It's ok, we're just as lost as you are.)

After 69 pages, Sam thankfully suggests leaving the whole idea in one of the counterfactual worlds where it might actually work. Here on Earth, though, endowment tax fans face three unpleasant choices: 1) make peace with how it does violence towards liberty, 2) acknowledge that it's both inefficient and unattractive on its own terms, or 3) accept its problems of "talent slavery, counterfactual talent slavery, and servitude to objective standards of rationality." It's enough to make our current tax code sound pretty dreamy!

So . . . we've established that our current tax code may not be the worst way to raise government revenue. But that doesn't mean you have to like how much you pay! So call us when you're ready for some real-world savings, and we promise to explain them in actual English!

Toby Keith's "I Love This Tax Problem"

In 2003, country music superstar Toby Keith released "I Love This Bar," the first single from his Shock'n Y'All album. (For those of you under age 25 or so, an "album" is . . . oh, never mind.) Billboard predicted the song would become "a beer-joint staple for years to come," and it promptly shot to #1 on the charts, selling over a million copies.

"I Love This Bar" is just one of Keith's odes to drinking — he's also scored hits with "Whiskey Girl," "Get Drunk and Be Somebody," and "Get My Drink On." "Red Solo Cup," his 2011 smash, made the red plastic cups the symbol of "party time" for the under-30 set. Naturally, with that sort of appeal, Keith had to open a bar of his own. Singer-songwriter Jimmy Buffet pioneered the concept, opening dozens of tourist traps Margaritavilles anywhere middle-aged men of a certain disposition gather to recall their youth. If Jimmy can do it, why can't Toby?

And so it came to pass that there are now fifteen Toby Keith's I Love This Bar & Grill locations from sea to shining sea. Keith's namesake joints feature guitar-shaped bars, beer served in mason jars (just like in the song), and elegant southern fare like chicken-fried chicken (?), fried bologna sandwiches (!), and deep-fried twinkies (!!). You'll find them plunked down in cities across our fair land, including such traditional country-music strongholds as Boston, Detroit, Cincinnati, and even Syracuse.

It's that last location in upstate New York — 1,400 miles from Keith's hometown of Norman, Oklahoma — that brings us to our story. You'd think the guy who sang "Beer for My Horses" with Willie Nelson would have no problem turning a profit with sales from a bar packed with thirsty fans. But apparently, you'd be wrong. The New York Department of Taxation and Finance has just hit the store with a "tax warrant" for $189,392.17 in unpaid sales taxes. The warrant lets the state levy the business' bank account or even seize the business entirely. (The restaurant remains open for now, as officials seem to think they have a better job collecting if they don't kill their golden goose. Phew!)

Bars and restaurants are notoriously risky businesses, even with "can't miss" concepts like "I Love This Bar." (If you think rising meat and cheese prices are hitting your wallet hard, just imagine what happens when you're feeding thousands of fans a month!) Restaurant owners who find themselves in trouble can be tempted to "borrow" from the government by hanging on to taxes they collect on behalf of customers and employees. The problem, unfortunately, is that every day they continue, they fall deeper and deeper into the hole — and sometimes they never dig back out.

Keith's restaurant may be struggling. But the singer himself isn't having any money problems. Forbes magazine has called him "Country's $500 Million Man," and "a one-man cash machine." He owns a liquor company, a record label, and a golf course. There's even an eight-passenger Learjet, painted in Oklahoma Sooner crimson and cream, outfitted with saddle-leather seats. But one thing Keith doesn't own is "his" restaurant in New York. While he does own chunks of the first few locations, he generally just licenses the newer locations to outside operators in exchange for a piece of the gross.

We realize few of you could imagine making millions selling fried bologna sandwiches. But we can imagine how unhappy you'd be if word leaked out that you owed enough tax to pay for an entire house! That's why we work so hard to help you plan to pay less. So call us if you'd rather spend your money treating your friends to a round of drinks. And remember, we're here for them, too!