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 2018, 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!

The rapper Cardi B grew up in the South Bronx’s Highbridge neighborhood, where the median family income barely tops $27,000. Cardi, born Belcalis Armanzar, couldn’t wait to get out. She spent much of her time at her grandmother’s home across the Harlem River in Washington Heights. By age 23 she released her debut video and album. In 2017, she joined the A-list with her hit “Bodak Yellow,” where she raps about being rich and arriving at “the club” in a Rolls-Royce Silver Wraith.

Apparently, Cardi really is stacking some nice paper. On March 22 2018, she recorded an angry rant demanding to know where her tax dollars go. “So you know the government is taking 40% of my taxes. And, Uncle Sam, I want to know whatchyou doing with my [gerund favored by rappers] tax money. Because, you know what I’m saying? When you donate, when you donate to a kid from a foreign country, they give you updates of what they’re doing with your donation.” She complained about rats infesting New York City’s subway, and concluded, like any good auditor, “I want receipts.”

Cardi does have a point here. If you give to a group like Save the Children, you’ll get letters from the child you’re helping. It’s too bad Cabinet secretaries don’t write taxpayers detailing where their dollars go. (“Dear Taxpayer: I write to tell you that I dropped $31,000 for a dining room table and millions more for private jet rides.”)

Fortunately for Cardi, it’s easy to find exactly where each federal spending dollar goes. (One caveat: it’s not entirely accurate to talk about where “tax dollars” go because the government spends almost $1.20 for every dollar it takes in.)

• The biggest chunk — 23 cents out of every dollar — goes to Social Security. Now, Cardi is just 25, so she’s probably not spending much time worrying about retirement, but she can take satisfaction knowing at least some of that will make its way back to her grandmother in Manhattan.
• Medicare and other healthcare services take 13 cents each. In fact, more than two-thirds of every tax dollar goes towards various social insurance programs, which also include unemployment compensation, veterans’ benefits, and the like.
• National defense takes 15.3 cents out of every dollar. Interest on the national debt eats up six cents more. And education takes another three cents.
• That leaves just six cents out of every dollar to cover everything else. That total includes all the perennial punching bags that budget hawks love to attack, like foreign aid (one penny per tax dollar), the Corporation for Public Broadcasting (1.2 hundredths of a penny), and the much-maligned National Endowment for the Arts (four thousandths of a penny).

We’re willing to bet that no matter where your tax dollars go, you’d like to see less of them going there. So don’t just criticize like Cardi B. Call us for a plan, and we’ll give you something to dance to!

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!