Steve Lawrence, who died last month, had a hit with Eydie Gormé in 1960 with the most delightful song, “This Could Be the Start of Something,” which was the theme of Steve Allen’s Tonight show. The song was about competent young adults living large in the great 1950s prosperity.

You’re up in an aeroplane or dining at Sardi’s
Or lying in Malibu, alone in the sand
You suddenly hear a bell
And right away you can tell
That this could be the start of something grand

The trombone underlay is as good as in Leroy Anderson’s Sleigh Ride. Further adulting that takes place in the song:

You’re lunching at “21” and watching your diet
Declining a charlotte russe, accepting a fig
When out of the clear blue sky
It’s suddenly gal and guy …

A line that comes in the extended version of the song is:

You’re doing your income tax or buying a toothbrush.

You’re doing your income tax. You certainly were, circa 1960, when even minimally successful people, let alone recently come-of-age “silent generation” men and women in a hurry, the subjects of the Steve & Eydie song, all had that April 15th burden/opportunity. It was a new thing. Federal income taxes reaching down to every income recipient—not just very high earners—became permanent in the war in the 1940s. Get your kicks out of doing your income tax in April, moved up from March 15th under Eisenhower because the tax bureaucrats needed more time.

“Doing” your income tax—what activity did that verb encompass? Totting up all the cash that came your way, certainly, but much more than that as well. “Doing” included making a raft of deductions and being careful to exclude from the IRS paperwork on your leather-inlaid desk income, all sorts of it, that was non-reportable. A farcical example of the ever-intense doing came in 1963. Seven months (in April, naturally) before he unloaded at Dealey Plaza, Lee Harvey Oswald shot through a window at, and superficially hit, Gen. Edwin Walker in his Dallas home while he was, the general later testified, “thoroughly engrossed in my income tax.”

While doing your income tax and dodging a bullet …

The deduction culture of the high-tax-rate era was something to behold. The scale is reflected in the macro numbers. It was difficult in the tax code of the time (which ran 15,000 pages) to find any significant rate of tax on any form of income that was equal to or less than 16 percent, which was federal revenues divided by GDP. Personal income tax rates ran from 20 to 91 percent. The corporate rate was 52 percent. The capital gains rate was 25. The tax on top estates was 77. Personal income and corporate income is national income. The tax take was 16 percent.

The 16th Amendment to the Constitution reads: “Congress shall have the power to lay and collect taxes on incomes, from whatever source derived.” These same words are repeated by statute in the opening stanzas of the Internal Revenue Code. As Harvard Law’s Stanley Surrey observed before Congress in 1959: “The code … proceeds to a definition of ‘gross income’—the starting point for any tax base—that is as broad as any to be found: ‘all income from whatever source derived.’ The courts have given the term ‘income’ an expansive scope in keeping with the statutory thrust.” It did not matter. Congress very largely declined to tax it. The government did not take 20-91 or 52 percent of income in the postwar prosperity days. It took 16 percent.

Doing your income taxes in the super-high tax-rate era, before the Kennedy tax cut of 1964—if not the Reagan tax cuts of the 1980s—was an exercise in taking enormous amounts out of the top line in accounting terms (revenues) to yield a small bottom line (income or profits subject to taxation). Pensions (contributions and lump sums), cash-value life insurance, deferred compensation, qualified stock options, straddles, depreciation sumps, expense accounts (one percent of GDP in 1960), municipal bonds, concierge medicine, club dues, school tuitions, “working” vacations—the list literally fills thousands of pages of circa-1960 tax manuals—all income categories either tax-deductible or non-reportable. It is the history of the period. To study the tax-deduction culture of the country in 1960 is to study what was ubiquitous, and what was thick in the air. A saw from back then regarding valuably tax-deductible “working” vacations: “It used to be that a businessman took his secretary on vacation and called her his wife. Now he takes his wife and calls her his secretary.”

Today, tax rates are lower. The top personal rate is an effective 40 percent and the top corporate rate 21 percent. And yet we collect 17 percent of GDP in tax revenue, a shade more than when tax rates were far higher. We continue to hear a drumbeat for higher tax rates, in particular on high earners and corporations, on the grounds that we used to have higher rates and we did fine. An essential aspect of the fiscal structure of post-World War II prosperity is that the federal government abjectly declined to collect taxes at posted rates because of the deduction culture. High tax rates existed as a holdover of Herbert Hoover, FDR, and World War II, but the public, especially its rising and affluent members, made clear that it was not going to comport with them. The government obliged and did not enforce the rates, and instead, offered a massive suite of legal tax-avoidance opportunities. Everyone went along to get along.

One can gainsay 1950s prosperity, call it a myth. The efficiency losses of the high-rate, high-deduction culture caused three recessions in the Eisenhower presidency, that of 1957–58 being the most severe. The impossibility of two household incomes stacked on top of each other on one tax return and facing the progressive tax ladder kept women in the Feminine Mystique box. Michael Harrington’s estimates of one-third of the nation at or near poverty indicted the system. And yet there were all the houses, the cars, the corporate jobs, the vacations, the inventions, “The Life!” as Tom Wolfe marveled while watching throngs of kids from that time cruising the ice cream shops and drive-ins at night, the scene exuding high-Roman levels of apex mass prosperity. We did not get this—halcyon days—while in any material way having high tax rates. We got this while not enforcing high tax rates due to high deductions, by making nosebleed numbers on a tax table inapplicable and irrelevant.

The left has a difficult time confronting this history. The famous Piketty-Saez income-inequality team in 2014: tax-deductible “consumption within corporations such as fancy offices or restaurants, corporate jets, etc. are intermediate costs of production and hence unrecorded in GDP estimates. Incidentally, we know of no evidence showing that such [deductible] intermediate consumption has declined since the 1960s (anecdotal evidence suggests that it might have risen, along with the rise of cash compensation).” As the tax-deduction value of intermediate corporate consumption decreased (as tax rates fell beginning with JFK), more of this consumption materialized. The evidence for such a claim had better be anecdotal. If you study the high-tax-rate era and do not see in it the peerless whiteout galaxy of tax deductions, tax deductions in their absolute glory, you are not studying that era at all.

The immense debt of the federal government has the nation thinking once again that tax rate increases might be the order of the day. The solace that once we had high tax rates and things went well is our memory playing tricks on us. In the several decades after World War II, we never had high tax rates in a meaningful sense. The high rates did their damage unimpeded at last when inflation blunted the force of the mass deductions. In the 1970s, annual double-digit increases in the consumer price index eviscerated the real value of depreciation schedules, among other dastardly effects, such as “bracket creep” that made large nominal/small real raises and cost-of-living adjustments face marginal as opposed to average tax rates. The United States finally got rid of high tax rates only when inflation, in the 1970s, started making them relevant for the first time.

In the debate over the national debt, the silence over what transpired in the 1990s is deafening. President Clinton, with Newt Gingrich in Congress, consolidated the Reagan tax-reform rates in the low part of their range—especially on the corporate and capital gains side—and cut spending, if more disproportionately in defense. Budget surpluses emerged. The surpluses immediately quashed all concern, rampant in the 1980s, that Reagan’s deficits would prove debilitating, in particular, as the common phrase went, for “our grandchildren.” It became apparent that in a handful of years, by the early 2000s, the national debt, unthinkably large a few years before, was shrinking so quickly that the ordinary market demands for treasury debt instruments might have to be fulfilled by other securities.

A balanced budget automatically eviscerates (amortize: “to kill”) debt, since debt service is an outlay item within the budget. If the federal government reset spending to the ample levels of 2019 and reinitiated Reaganite tax reform, a debt-free twenty-first century can be ours, complete with levels of mass prosperity competitive with any in our history. Lower, not higher tax rates are consistent with a full expression of natural economic vitality and therefore the capacity of the country to meet its debt obligations with ease.