How The Tax Man Transformed What Music People Listened To
Eric Felten writes in the WSJ of the stiff wartime "cabaret tax" -- a ruinous 30% (later merely a destructive 20%) excise applied to all receipts at any venue that served food or drink and allowed dancing, leading to the end of the Big Band era:

The name of the "cabaret tax" suggested the bite would be reserved for swanky boîtes 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.

...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.

The cabaret tax was finally eliminated in 1965.