The Taxman and Bebop: How A Tax Gave Rise to a Musical Movement

Dancehalls faced the wrath of the taxman in a post-World War II period. Interestingly enough, the Internal Revenue Service seems to have had a hand in a new, burgeoning a musical movement as a result.

In a recent article in the Wall Street Journal, Eric Felton discusses the following question: Do taxes change behavior or not? He pays particular attention to the “cabaret tax,” a wartime tax that went into effect that had lasting implications those who proposed and passed the tax would never have imagined.

After the end of the World War II, the potential for popular big bands to find an audience in the young men returning home from overseas was great. The bands, having been wildly popular since the early 1930s, were poised for another bid decade. This was not to be, as many of the most popular bands of the day were no longer together. Benny Goodman, Harry James, and Tommy Dorsey—whose bands had dominated the previous decade’s music scene—had all disbanded less than three years after the war had ended. While some bands were able to adapt to the changing times, many were unable to keep up.

The cabaret tax of 30%, an excise tax on all receipts at any venue that served food or drink and allowed dancing, was imposed in 1944. While many thought that the elegant venues of the period would be the only businesses affected, the Bureau of Internal Revenue (a precursor to the present-day Internal Revenue Service) offered clarification and expanding the reach of the tax to include more of the businesses of the day in the following excerpt of the code: “A roof garden or cabaret shall include any room in any hotel, restaurant, hall, or other public place where music or dancing privileges or any other entertainment, except instrumental or mechanical music alone, is afforded the patrons in connection with the serving or selling of food, refreshments or merchandise.”

The far reaches of the tax were soon apparent, as dancing was among the most popular activities of the day. Many club owners had anticipated that the tax would not affect attendance at their dance halls to substantially, as they were convinced that the need of the young men to find a good time would outweigh the monetary consideration, but they soon found that prediction to be incorrect. Soon after the tax was imposed, club owners saw steep declines in patronage and profit.

In an attempt to work around the tax, some owners began a policy of starting the shows after dinner, hoping that this would circumvent the tax. Unfortunately for them, the Bureau was once again quick to clarify, stating that patrons would have to leave the establishment after dinner and prior to the start of any shows or dancing. If patrons failed to leave before the entertainment began, anything purchased prior to the show would be subject to the cabaret tax.

The tax soon gave way to a new form of non-danceable jazz—bebop—as clubs that provided music that was strictly instrumental and not able to be danced to not subject to the tax. The Wall Street Journal Article asks, “…how differently might the aesthetic impulse behind bebop have been expressed if it had been allowed to develop organically instead of in an atmosphere where dancing was discouraged by the taxman?” Felten predicts that the artsy niche that jazz became may not have come about.

The cabaret tax remained in effect until 1965, after it was lowered several times from the ruinous levels of the mid-1940s. The swing era was long gone by then in a disappearance aided by the non-dancing taxman.


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