It’s a well-known principle of economics that “if you tax something you get less of it.”
Exhibit A: DC-area jazz musician Eric Felten explains in today’s WSJ how the federal excise tax on “cabarets” that was enforced from 1944 to 1965 at an initial ruinous rate of 30% may have actually changed the direction of jazz by basically taxing Swing music out of existence. Here are some excerpts:
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.
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.
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 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,” Max 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.
MP: I saw the Eric Felten Jazz Orchestra perform last Friday night at the new Bethesda Blues and Jazz Supper Club, and they were really swingin’!