How the Taxman Cleared the Dance Floor

The 'cabaret tax' that killed the Swing Era.


by Eric Felten
March 17, 2013

These are strange days, when we are told both that tax incentives can transform technologies yet higher taxes will not drag down the economy. So which is it? Do taxes change behavior or not? Of course they do, but often in ways that policy hands never anticipate, let alone intend. Consider, for example, how federal taxes hobbled Swing music and gave birth to bebop.


With millions of young men coming home from World War II—eager to trade their combat boots for dancing shoes—the postwar years should have been a boom time for the big bands that had been so wildly popular since the 1930s. Yet by 1946 many of the top orchestras—including those of Benny Goodman, Harry James and Tommy Dorsey —had disbanded. Some big names found ways to get going again, but the journeyman bands weren't so lucky. By 1949, the hotel dine-and-dance-room trade was a third of what it had been three years earlier. The Swing Era was over.


Dramatic shifts in popular culture are usually assumed to result from naturally occurring forces such as changing tastes (did people get sick of hearing "In the Mood"?) or demographics (were all those new parents of the postwar baby boom at home with junior instead of out on a dance floor?). But the big bands didn't just stumble and fall behind the times. They were pushed.


In 1944, a new wartime "cabaret tax" went into effect, imposing a ruinous 30% (later merely a destructive 20%) excise on all receipts at any venue that served food or drink and allowed dancing. The name of the "cabaret tax" suggested the bite would be reserved for swanky boites such as the Stork Club, posh "roof gardens," and other elegant venues catering to the rich. But shortly after the tax was imposed, the Bureau of Internal Revenue offered this expansive definition of where it applied: "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 tax hit not just swells, but anyone who liked to go out dancing—which in those days included just about everyone who went out at all.


At first, clubs were convinced "that war workers' coin is so free," as Billboard reported in 1944, that the tax "will not hamper the boys and girls out seeking a good time." But in the next few years, struggling nightclub owners were trying every which way to avoid having to foist the tax on customers.


Some adopted a "no show until after dinner" policy in the hope that food and drink consumed before the entertainment started wouldn't be subject to the tax. No such luck: The Treasury Department ruled that patrons would have to finish their meals and "leave the establishment prior to the commencement of the dancing or other entertainment." If they didn't, once the first note of music was sounded, everything the customer had consumed beforehand was subject to the tax.


Perhaps the most comical effort to get around the levy was the 1948 fad in Detroit, Chicago, Philadelphia and New York for "pantomime" acts, in which entertainers would lip-sync elaborately to records. The performer wasn't actually singing and so the show didn't meet the federal definition of cabaret entertainment, which carved out an exception for venues providing "mechanical music alone"—as long, of course, as there was no dancing.


The tax-law regulation's other exception had the biggest impact. Clubs that provided strictly instrumental music to which no one danced were exempt from the cabaret tax. It is no coincidence that in the back half of the 1940s a new and undanceable jazz performed primarily by small instrumental groups—bebop —emerged as the music of the moment.


"The spotlight was on instrumentalists because of the prohibitive entertainment taxes," the great bebop drummer Max Roach was quoted in jazz trumpeter Dizzy Gillespie's memoirs, "To Be or Not to Bop." "You couldn't have a big band because the big band played for dancing."


The federal excise tax inadvertently spurred the bebop revolution: "If somebody got up to dance, there would be 20% more tax on the dollar. If someone got up there and sang a song, it would be 20% more," Roach said. "It was a wonderful period for the development of the instrumentalist."


Bebop radically transformed jazz. But 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? Jazz might have remained a highly sophisticated popular music instead of becoming an artsy niche.


Long after the war ended, the cabaret tax persisted. By 1956 the musicians union was bemoaning that two-thirds of its members—many of them former big-band performers—were "unemployed or are unable to make the major portion of their livelihood from music." When Rep. Thomas Pelly (R., Wash.) in 1957 argued that musicians and entertainers were "under the lash" of the tax, other lawmakers suggested the solution wasn't to repeal the tax, but to provide musicians with federal grants.



The cabaret tax dropped to 10% in 1960 and was finally eliminated in 1965. By then, the Swing Era ballrooms and other "terperies" were long gone, and public dancing was done in front of stages where young men wielded electric guitars.