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Can Florence in the Quatrocento
Help Shape Tax Policy Today?
HUGH CALKINS*
During the entire month of April 1990, I was a resident of the Villa I Tatti,
the Harvard University Center for the Study of the Renaissance in Italy. The
Villa is a library located amid orchards and vineyards just outside of Florence.
It serves as a working and socializing place for a dozen or more scholars pursuing studies in everything from Fra Angelico at San Marco to the Medici
and Music. The temptation to try my hand at mini-scholarship—something
I never had the opportunity to do before—was irresistible. I therefore decided
to apply what I knew about tax policy—the only subject on which I was conversant and which seemed remotely relevant—to Florence in the days of the
Medici, and see what happened.
Upon learning of my intention, several of the social scientist fellows of
the Villa suggested that I focus my attention on the “catasto”; Florentine
legislation adopted in 1427. They claimed that the catasto was a significant
event in the economic history of Florence, and that it might be significant
in tax history more generally. Moreover, having heard my halting efforts to
speak Italian, they thought I would be assisted by the fact that there were
three books quite precisely on point—one of which was in English.1 They
suggested that I supplement these books by examining original documents in
the Archivi di Stato. To facilitate that exploration, they referred me to Signor
*
This Article originally appeared in The Tax Lawyer, Vol. 44, No. 3 (1991) and is reprinted
here in its original form in remembrance of the author, Hugh Calkins, and in recognition of
the timeless issues he continued to study after he retired from the practice of law and that continue to provoke thoughts about tax policy today. Hugh Calkins passed away in August 2014,
and a memoriam appears at the beginning of this issue. At the time this Article was written,
he was a retired partner in the Cleveland office of Jones Day. He served as Chair of the ABA
Tax Section in 1985–86.
1 The book in English was Professor A. Molho’s very helpful Florentine Public Finances
in the Early Renaissance 1400–1433 (1971) [hereinafter Molho]. He also wrote an essay,
published in Italian and in pamphlet form, entitled Guerre Tasse e Politica a Firenze nel Primo
Rinascimento [hereinafter Molho Pamphlet] that reflected some of the same ideas. Another
book which was available to me in Florence, although only in its original French form, was
D. Herlihy & C. Klapisch-Zuber, Tuscans and Their Families—A Study of the Florentine Catasto of 1427 (Ecoles des Hautes Etudes, Paris 1978) [hereinafter Herlihy].
The third book, also very much on point and of which I could comprehend a little by the end
of the month, was E. Conti, L’Imposta Diretta a Firenze Nel Quatrocento (Nella Sede
Dell’Instituto, Rome 1984). I also found G. Brucker, Renaissance Florence (1969) [hereinafter Brucker] and R. Goldthwaite, The Economy of Renaissance Italy, the Preconditions for
Luxury Consumption, in I Tatti Studies: Essays in the Renaissance (vol. 2, L. Olschki ed.
1987) [hereinafter Goldthwaite] very helpful.
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Gino Corti, an experienced and charming paleographer2 who demonstrated a
wonderful enthusiasm for the quest.
Soon I was enchanted by my journey into the “Quatrocento.”3 Just as a
faraway place becomes more interesting when one explores there a subject
with which he has some familiarity, so does an inquiry into a period more
than half a millennium ago gain interest when one examines there a subject
about which he knows something in modern times. By the end of the first
week, I was spending all the time my wife would allow me to spend away
from more sybaritic activities, pouring over my books in the Villa I Tatti and
exploring thirty pound, fourteen-inch thick, wooden-covered volumes with
Signor Corti at the Archivi. These volumes bound heavy parchment pages
on which a scribe in the 1420’s had recorded the enactments of the City
Council and the deliberations of the agency charged with collecting the taxes.
The introductory letters of initial words were elaborately and colorfully calligraphed. Occasionally the scribe, tiring of writing words, inserted cartoons
in the margins.
This article is an account of what I learned during my journey into the
Quatrocento. If it contains inaccuracies,4 as it may, that is because my ability to read French is imperfect, my skills at reading Italian are much worse,
and the sybaritic activities which one’s spouse can organize in and around
Florence are unlimited.
Florence in the early Quatrocento was a Republic of fiscal discontent. Its
“normal” revenues were derived from two principal sources. The first, accounting for about three quarters of the total revenues, was the “gabelles,” a group
of sales, excise and document taxes, and import duties which were paid by
all 65,000 or so residents of Florence’s roughly 75 by 90 mile territory.5 Like
more indirect taxes, the gabelles were regressive in their distribution among
income levels; a distribution which roughly parallels that of the United States
today. The second source, accounting for the remaining quarter of revenues,
was the direct taxation imposed by Florence, the sovereign, on the countryside immediately surrounding it (the “contado”) and on subjugated cities such as Pisa and San Gimignano as well as the countryside surrounding
them (the “district”). These direct taxes were allocated among the localities
in proportion to predictions of their relative ability to pay.6 These two major
2 The term “paleographer” means an expert in the study of ancient manuscripts. See Webster’s Dictionary and Encyclopedia 3141 (1960).
3 “Quatrocento” is the term used by art historians and Italians to the century whose years
begin with the number 14. This term is a great improvement on what Americans refer to simply as the “fifteenth century.”
4 In particular, my translations from the original texts are based on my taking dictation from
Signor Corti and should be considered approximate only.
5 See Molho, supra note 1, at 54-61; see also Brucker, supra note 1, at 1-5.
6 The predictions were based upon the data contained in “information returns” which each
household was required to file. The returns listed each household’s assets, liabilities, income,
family size, and other relevant facts.
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tax sources covered the normal, peacetime expenses of the Republic. Both
sources were considered to be at maximum levels; that is, it was expected that
neither could be increased without damage to the economy or excessive risk
of revolt in the district.7
The fiscal trouble which Florence encountered in the Quatrocento
stemmed from the fact that it was at war. Until 1402, it defended its territories against Milan; in the first decade of the Quatrocento it was at war
with Pisa; from 1424 to 1432 it sought to conquer Lucca. Florentine warfare
(until Machiavelli pushed through more modern methods a century later)
was extraordinarily expensive because of the Florentine custom of fighting
exclusively with mercenary troops. Moreover, the leaders of the various bands
of soldiers of fortune who loitered in small towns between engagements discovered the strength of their bargaining position. Of what use was it to any
Italian city to hire the second best army if its adversary hired the best? As
a result, the cost of mercenary troops, and with it the annual deficit of the
Republic, rose rapidly in the 1420’s.
Warfare in the 1390’s had also been expensive. During that decade, the citizens of the Republic spent at least 2.5 florins8 beyond the “normal” revenues
principally for military purposes. Florence incurred a similar debt as a result
of the war over Pisa in the first decade of the Quatrocento. To conduct the
war over Lucca in 1424–1432, the rising cost of the mercenaries lifted the
amount Florence needed to 3.8 million florins.9
Florence covered its military expenditures the same way that the United
States has covered its budgetary deficit in recent years: it borrowed the funds.
Florence had practiced deficit finance in time of war for many years. As a
result, its public debt in 1423 was already about 3 million florins, a sum
about six times its “normal” revenues.10 (In the United States, the level of
federal debt is more than three times federal tax revenues). The rate of interest
typically paid by Florence was around 5%. At that rate, interest costs in 1423
amounted to about 30% of “normal” tax revenues. (In the United States federal interest cost is now close to 18% of federal tax revenues). Voluntary and
commercial credit sources were insufficient to provide the large amount of
financing needed—at least at interest rates considered acceptable. Therefore,
Florence resorted to the practice (used by Brazil in modern times) of imposing forced loans, called “prestanzas,” on citizens wealthy enough to provide
the needed capital.
See Molho, supra note 1, at 34-37.
A florin was a coin made of a specified amount of gold worth roughly 10 days of wages of
an unskilled laborer, 3.5 days of work by a skilled artisan, 5 bushels of grain (note how expensive food was), four months rent of a cottage or two weeks rent of a city barber shop or a city
home. If we summarize these valuations by roughly equating a florin to 300 1990 U.S. dollars,
the 2.5 million florin was roughly $750 million or $11,500 per year per capita.
9 See Molho, supra note 1, at 63.
10 See Molho, supra note 1, at 72-3. The size of the public debt was apparently reduced by
6% or so in the peaceful years of 1414–23.
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Prior to 1427, the prestanzas were imposed upon the wealthy households
of the city11 by the taxing officials in accordance with their judgment as to
each household’s ability to provide the money. In order to prevent favoritism
and unfairness in the officials’ allocation of the prestanzas among the households, the Republic instituted a practice of randomly selecting the taxing
officials by pulling their names from a box containing the names of the heads
of all the wealthy families and by selecting new taxing officials every two to
six months. Notwithstanding these practices, many citizens claimed that the
amounts allocated to them by the officials were excessive and unfair.
There is some dispute as to the role which Giovanni de Medici played in
what happened next. He was a Florentine banker, then about 65 years of age,
who was the founder of the dynasties of Medici who, generally without holding public office themselves, dominated the city for almost 300 years. His
admirers12 assert that he was a statesman who put the interests of the common people and the Republic above his parochial advantages and secured the
adoption of an efficient and equitable formula for prestanza allocation, knowing that his family would thereby give up the opportunity of using its disproportionate influence to achieve a reduced burden. Cynics claim that Giovanni
was a wily fellow, a true representative of his self-interested family, who either
pretended to support the new system while quietly trying to subvert it, or was
prescient enough to understand that it would preserve Florentine borrowing
practices which would make his family the masters of Florence for much of
the next three centuries.
However this may be, in 1427 the Florentine Council, which was composed of about 200 persons who exercised the legislative powers of the
Republic, decided to institute the catasto.13 Its starting point was to apply
to the city of Florence the information return requirement already imposed
on the contado and the district. Each of the nearly 10,000 households of the
city was required to list, with a significant exception described below, all of
the real and personal property assets of the household, and the value of each.
In the case of an income producing business, the value was determined by
capitalizing annual income at 7%. For certain assets, the ten officials who
administered the catasto published lists of deemed values. For instance, a
bushel of wheat on hand close to the city was accorded a higher value than a
bushel stored at a more remote location.
Few if any wealthy families lived in the contado or in the district.
E.g., G. Young, The Medici (1930); see also Florence and Medici topics, Encyclopedia
Britannica (11th ed. 1911).
13 The law can be found in PR, CXVII ff 38v-43r. Note that “ff” refers to folios, which are
the equivalent of pages, except that each page bears the same number when its top side is to the
right (known as “r”) and when its top side is to the left (known as “v”).
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The only excluded property14 was residential real property, including furnishings; which term also comprehended household works of art and the family mule.15 Such property was excluded from the tax base without limit as to
its value.16 No hard evidence appears to have survived linking this exemption
to the splendid scale of the palaces of the leading families, and the extraordinary burgeoning of painting and sculpture in Florence in the Quatrocento.
But, as with the tax benefits accorded first and second home mortgage loans
and real estate taxes in the United States today, it is a reasonable inference that
the exclusion of the palaces and art from the tax base encouraged the expenditures which wealthy Florentines lavished upon them. It is certainly the case
that the visitor to the public museums of Florence today soon becomes aware
that most of the works of art on display came into the hands of the state after
a long period of private ownership.
The catasto provided that debts, amounts representing the capitalization of
expenses,17 and a standard deduction were to be subtracted from the aggregate value of assets. The net value was then multiplied by one half of 1%
to yield the amount of forced loan which the household was to provide for
each catasto. A committee of ten officials then estimated the yield of one
catasto, compared it with the amounts of funded needed, and imposed as
many catasti, and as often as necessary, as were needed to pay the troops.
Progressivity in the catasto was facilitated by a very large standard deduction
from the aggregate of the taxable property. It was fixed at 200 florins (roughly
$60,000 per member of the household, not counting employees and apprentices who were taxed in their own households, and slaves). Since a household
was likely to include three generations, with siblings in at least two of them,
the deduction for many households must have been hundreds of thousands
of florins. The deduction was reduced in varying degrees for households
located in the district, and it appears to have been subject to qualification
even for those living in the city of Florence. Under the original enactment,
only 1200 of the 9800 households required to file returns reported positive
net assets after the standard deduction. Exercising an authority I did not find
in the enactment as written, but responding to the city’s need for revenue, the
catasto administrators appear to have sought voluntary participation from the
zero base households. After one year, the proceeds of such participation were
14 Lawyers will be interested to note that income from professional services not derived
from the use of property appeared to escape taxation entirely. This may be confirmation of the
statement of Gene Brucker that law and international trade were the two most highly valued
occupations in Florence at the time, with university professors and scholars running close
behind. See Brucker, supra note 1, at 16.
15 The prejudice against women was apparently so strong that it was necessary to specify that
the mule was excluded whether male or female.
16 Although apparently without statutory authorization to do so, the administrators of the
catasto did put a limit of the value of residential property which could be deducted in the
contacto and the district. See Herlihy, supra note 1, at 63.
17 For instance A.C. II. ff 57v records that the expenses associated with feeding and caring
for a pair of oxen give them a negative value of one florin.
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so small that a new law was passed.18 It provided that, “so that the state would
not be abandoned by them,” the catasto officials could impose a forced loan
obligation on a zero base household without its consent. All households were,
in any event, subject to a new head tax (like that recently introduced and
slated for repeal in Great Britain) of about .03 to .08 florin (roughly $10 to
$80) for each male member of the household between the ages of 19 and 60.
The catasto relied for its enforcement on very limited third party information returns, the encouragement of informers, significant audit activity
in response to informers’ tips, and large penalties. The principal third party
information return related to public indebtedness. The Florentine Treasury,
called the Monte, was required to notify catasto officials when it paid any
of its obligations to a citizen. Such payments could significantly increase a
citizen’s net worth since, prior to payment, the claims against the Monte
were carried at specified fractions, such as one-half of face value, to approximate the value at which they were traded in the Florentine and international
financial markets. In addition, since most debts were owed to taxpayers, the
catasto officials could check for correspondence of interest payments with
interest income.
If a citizen omitted an asset from his return, fraudulently claimed a low
value for it, or fraudulently deducted a claimed liability which did not exist,
the law provided that one half the amount involved (note that this was
100 times a single catasto forced loan) was forfeited to the Republic. If an
informer’s “denunciation” had brought the omission or the fraud to the attention of the catasto officials, one half of the amount forfeited, equaling one
quarter of the amount involved or 50 times the amount of a single forced
loan thereon, was paid to the information. To make it convenient to lodge
denunciations inconspicuously, boxes were placed around the city to receive
them. Considering these factors, it’s no wonder that there were “hundreds” of
denunciations lodged by informers.19
If a household’s obligation to make a forced loan was established and it
failed to ante up the funds, then a variety of remedies was available to the
fisc. The head of the household could be disenfranchised or reclassified into
the “magnate” class—the class of formerly wealthy and powerful landowners
against whom overt discrimination was practiced by Republican Florence.
Goods equal in value to the debts to the Republic could be confiscated and
sold by so-called “officials of the sales” to raise the funds owed. In addition, a
law of October 15, 1425 rendered a man’s relatives responsible for his prompt
payment of a forced loan.20
I have had difficulty determining to what extent the returns filed by households were made public. It is hard to see how informers could be expected
to lodge denunciations unless they knew what the target of suspicion had
PR 119 f 63v. June 10, 1428. See Herlihy, supra note 1, at 73-74.
See Herlihy, supra note 1, at 49; see also Molho, supra note 1, at 50 n.5.
20 Molho, supra note 1, at 105-7.
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reported in his return. A.C. II folio 6, paragraph 25 required the ten catasto
officials to record the text of the returns submitted by households in a book,
and that the book “must be shown to whomever wants to see and make a
copy of it.” If there was a limitation on this disclosure requirement, it was not
apparent to Signor Corti or me. It is conceivable, however, that only the net
assets or the amount of the forced loan obligation was made public. I recall
seeing a volume in the Archivi dating from the catasto period which listed
households and the net assets or catasto obligation of each.21 Professor Molho
has uncovered in the records an instance in which information from a return
was procured by a father interested in evaluating a dowry. The information
revealed circumstances which strongly suggest that the returns were not generally available to the public. It is situations such as these which make an
investigator of events 560 years ago feel a little like Sherlock Holmes.
Whatever the rigors of the law as written, collection of the prestanza
appears in application to have been in considerable part a process of negotiation between an increasingly desperate fisc and an increasingly uncooperative
citizenry. The shortfall between the estimated yield of a catasto and what it
actually produced in cash that the Republic could use to pay its army grew
larger; a shortfall of 21% in 1427 grew to 35% six years later.22 These shortfalls appear to have been met by a combination of devices. For example, special taxes were imposed and interest rates on some borrowings were raised to
coax out voluntarily loaned funds from citizens and others.
The shortfalls undoubtedly contributed to the number and frequency with
which catasti were decreed. The result was an exaction burden which was very
heavy indeed. Professor Molho calculated that
From the beginning of 1428 until the end of 1433, in addition to certain
special levies, the citizens of Florence were asked to pay 153 5/6 catasti.
Since each catasto assessed at the rate of 0.5 percent a tax on net capitalization—which, by the structure established in 1427 and by the definitions
provided by the Florentine legislators, was much smaller than gross capitalizations—it follows that over a period of six years the city undertook to
collect in taxes 76 percent of the total net capitalization available in the city,
or an average of 12.6 percent per year. If we remember that according to the
calculations of the communal officials the average return of investments in
the city was about 7 percent per year, we realize that on the average, during
the years 1428 to 1433, each Florentine citizen was required to pay taxes
amounting to approximately 180 percent of his income!23
Measures were introduced to mitigate the burden of the catasti on the
households subject to them. Citizens were permitted to avoid a prestanza
An imperfection in my research is that I cannot furnish the citation to this volume.
See Herlihy, supra note 1, at 44.
23 Molho, supra note 1, at 92. Recall, however, that roughly $60,000 of assets per capita
were exempt from tax and that residences and some other unproductive assets were excluded
from the tax base entirely.
21 22 Tax Lawyer, Vol. 68, No. 1
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larger than they felt they could afford by paying to the Republic a fraction,
such as one half, of the amount assessed, with no right to recover any of it or
to be paid interest with respect to it. In addition, amnesties were allowed on
both a general and a specific basis.
An illustration of a general amnesty measure offered by the Republic is
the enactment of a bill by the Florentine Council on August 2, 1425. It
started with the generous observation that “the government, believing that
for poverty and not ill will some people did not pay their tax obligations, and
wishing to absolve them from penalty” and stated that persons who owed
prestanza obligations from December 1415 to the date of enactment could
satisfy those obligations by paying between 60% and 80% of the amount
owing, as long as they did so within the next two months.24
In 1424, the Council offered another general amnesty measure in an
attempt to lure back to the contado those agricultural workers who had emigrated to escape heavy Florentine taxation. It promised those individuals a
25-year exemption from new taxes and old debts. In 1431 these privileges
were extended to all emigrants from the district, whether they were agricultural workers or not. Finally, during the 1430’s, a 20-year tax exemption was
offered to all individuals who would immigrate to the Republic.25
Amnesties could also be obtained from the Florentine Council on an individual basis. On May 27, 1426 PR 116, ff 30v-r was adopted. Its first paragraph, adopted by a close vote, reduced the tax obligation of a citizen from
seven florins to one, apparently in recognition of financial hardship. The third
paragraph, approved with near unanimity, granted a lifetime exemption to
that rarest of all male citizens, a Florentine who had participated in military
service on behalf of his city.26
The tax history of Signor Chirico di Piero Tornaquinci, a member of an old
and respected family, is instructive. He failed to pay the prestanzas assessed
in 1423, 1424, and 1425. On May 24, 1426, the Potesta (a high official
with judicial power) banished him from Florence on pain, should he return,
of decapitation and confiscation of all his worldly goods. The indictment
asserted that “inspired by a diabolical spirit, having lost all his respect for God
and for the state of Florence, [he] was contributing to the erosion of age-old
communal liberties and the possible subjugation of the city by a hateful and
tyrannical regime by his refusal to pay his taxes for three continuous years.”
In 1429 Signor Tornaquinci petitioned the Council to be allowed to return
to Florence, and to keep his head and at least most of his worldly goods if
he did so. The Florentine Council agreed, by a vote of 262 to 87, apparently
accepting his contention that he failed to pay his prestanzas not because he
PR 115. F 120r-v.
See Brucker, supra note 1, at 83.
26 One of the hazards of research into the Quatrocento is the number of intriguing byways
into which one can be led. The sixth paragraph absolved a tailor from Arezzo from having his
feet cut off. It was tempting to try to ascertain the crime for which this punishment had been
considered suitable. Trespass into a lady’s boudoir, perhaps?
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was a rebel, but because his tax burden was insufferable. As he said, “he had
lived miserably, and he had left the city to provide the necessary living to his
family.”27
As contemplated in the 1427 enactment, a new round of household returns
was required in 1430 and 1433. (In between the triennial revisions, known
changes that increased the tax base, such as the receipt of a dowry by a father
in the household, or the death of a household member, were taken into
account. However, changes which reduced the base, such as the birth of a
child, were not). Starting soon after the enactment of the catasto, however,
owners of business assets other than land, whose forced loan shares had been
substantially increased by the catasto, began to complain loudly. Their assets,
they said, were the kind “which people possess today and lose tomorrow.”28
Such assets should not be the basis for compulsory loans to the Republic.
The objectors, who had only mustered 13 votes out of 198 when the catasto
was enacted in 1427, became the majority of Council in 1434. They voted
that forced loans required in that year should be allocated by the pre-1427
method “per arbitrio,” or according to the judgment of the tax officials, not
circumscribed by the catasto formula. For the remainder of the century,
forced loans were sometimes allocated “per arbitrio” and sometimes by the
catasto method, based on new rounds of returns required from time to time.
Professor Molho has called attention to an intriguing and slightly sinister aspect of the financial history of Florence in the early Quatrocento. The
catasto, as well as the preceding and succeeding systems of more discretionary
allocation of the heavy prestanza burdens, assured the Republic of a substantial cash flow of low-interest borrowed funds for many decades. The costs of
the frequent wars were much greater than taxes and prestanzas could accommodate. Most of the additional needed funds were borrowed, at much higher
interest rates, from whatever sources would loan them. In the beginning,
and to a lesser extent later on, these sources were primarily the major banking houses of Florence. Later banks in other cities, such as Venice, became
prominent creditors. Since these commercial market borrowings bore higher
interest rates, they were paid first. They were, in effect and perhaps in form,
secured by the tax receipts of the city, and by its prestanza borrowings, which
were forced upon the 10% to 15% of the population whom we would call
middle class and which paid only a 5% interest rate.
Professor Molho summarizes the situation this way:
Thus an unusually complex system of financing was being created, based
on the creation of categories of creditors. The first category, composed of
large segments of the populace, received a return of 3 ½ to 8 percent per
PR CXX ff 22y-23r. See Molho, supra note 1, at 110-112.
Molho, supra note 1, at 86.
27 28 Tax Lawyer, Vol. 68, No. 1
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year on their investments, [29] which, however, they made reluctantly and
under duress. The second category of creditors, whose investments fetched
them a return of 20 to 40 percent per year, advanced their money to the
state only on the understanding that the collateral for their loans, as well
as the fund from which their interest would be paid, would come from
assured forced investments in the Monte in the form of catasto payments
on the part of the regular middle rank bourgeois. In a very real sense the
particular economic and fiscal situation in which Florence found itself during the late 1420’s and early 1430’s contributed to the forging of a fiscal
structure whose maintenance depended on the continued exploitation, as it
were, of the rank-and-file bourgeois by the grand entrepreneurs of the age.
The overwhelming majority of Florentines were losing entire patrimonies
during those years because of the oppressive tax burden. Yet, concurrently,
their very tax payments were being used, partially but consistently, to pay
the interest owed by the government to those few citizens fortunate enough
to have large sums of cash available that they could loan to the state.30
At the same time as the Florentines were losing their patrimonies, they
were losing their freedoms. According to Professor and Senator Pasquale
Villari, an authority on Italian history who wrote in the late nineteenth century, one can date from the return to Florence on September 6, 1434 from a
brief exile of Cosimo de Medici, Giovanni’s son, the long domination of the
city by generations of the Medici family, and the virtual extinguishment of its
republican liberties.31
It is hardly surprising that the cynics believe that Giovanni de Medici was a
wily old fellow who supported the catasto because he foresaw, however dimly,
what marvelous consequences it would have for the Medici family.
Can we learn anything from the experience of the Florentines half a millennium ago? As we consider the significance of an experience so remote in
time and place and contemplate how it relates to use today, we should recall
an observation of Mr. Justice Holmes. The human mind, he said, is like a
magnet; it attracts the facts which are in line with its polarization, and repels
those which are not.
After my excursion into Florence in the Quatrocento, my mind attracted a
number of facts related to tax policy which are aligned with its “polarization”
as well as a few in conflict with it. Hopefully, readers of this report will also
find within it facts which are in line and in conflicts with their own minds’
polarizations.
For example, I have long believed that the subsidies allowed by the Internal
Revenue Code to home ownership should be limited to encouraging such
29 Interest may have been less than the prevailing 5% because from time to time the city was
forced to announce that it could only pay a fraction of the interest it owed. It occasionally was
more than 5% because the city believed that, even on a compulsory loan, a higher rate was
necessary to bring out the needed funds. See Molho, supra note 1, at 102.
30 See Molho, supra note 1, at 176; see also Molho Pamphlet, supra note 1.
31 See P. Villari, Medici, in 18 Encyclopedia Britannica (11th ed. 1911).
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ownership among families which otherwise could not afford a home. I would
accomplish this limitation by confining interest deductions to mortgages
on primary homes up to a principal amount of no more than, roughly, the
average price of a dwelling unit in a standard metropolitan statistical area. I
would impose a similar limit on the deduction of real estate taxes. Our present unlimited deductions for mortgages and real estate taxes on second as
well as primary homes seem to me to encourage the same type of conspicuous
consumption as was seen in Florence during the Quatrocento. I find evidence
supporting my view in the statements of economic historians who tell us that,
starting in about 1425, Florence began a slow decline in strength, power and
influence.32 The United States today resembles Florence in that respect; our
investment in productive assets and business ventures has been lower than
that of our international competitors for decades. The earlier justification—
that many of these countries were rebuilding from war damage—is no longer
applicable. We should take note of the gradual loss of economic ground vis-àvis competitors in both Florence and the United States, while tax systems in
both republics encouraged investment in unproductive assets.
A second interesting feature of the Florentine catasto is the high standard
deduction. If we accept the ratio of one florin to 300 1990 U.S. dollars as
a fair summary of the purchasing power of the florin as stated in footnote
8 above, then the 200 florin per capita deduction in the catasto is roughly
equivalent to $60,000 in this country today. If we then convert assets to
income at the 7% rate used in the catasto, we have in the catasto a standard deduction per member of the household roughly equal to $4,200 today.
Our standard deduction depends upon the status of the taxpayer and our
exclusion phases out at higher income levels. A rough generalization is that
together they are about half of the level of the standard deduction in Florence
in the Quatrocento. Thus, the Florentines utilized what some have proposed
in the United States: a flat income tax rate with an increased standard deduction. Does Florentine experience show that this is a good idea?
While there are many differences to obscure the comparison, I think the
answer to that question is “no.” The financial situation described by Professor
Molho, in which a flat rate exaction paid by all those above a minimum level
was used, in effect, to secure borrowings from the very wealthy, is not an
attractive picture. The 28% ceiling on tax rates for the very wealthy which is
now a part of our tax system has some of the characteristics of the Florentine
system. Continuing progressivity up to about a 50% combined federal, state
and local rate seems to me to be a policy much more likely to prove satisfactory for many decades.
I have been opposed to amnesties as a solution to federal tax administration
and revenue deficiencies. I have opposed the kind of special legislation which
was incorporated into the Internal Revenue Code of 1986 in such abundance
32 See Brucker, supra note 1, at 128. For a fascinating explanation of why Florence had the
wealth to devote to its palaces and its art, see Goldthwaite, supra note 1.
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in order to facilitate its enactment. The experience of Florence seems to me
to suggest that a tax statute from which the legislature itself grants exceptions
on an arbitrary or favoritist basis is unlikely to receive widespread voluntary
compliance, and may be soon replaced by some other form of taxation.
Then there is the question of informers. In the United States, they are paid
10% of the tax deficiency. This is much less than 25% of the value of the
omitted assets, which was awarded those who denounced their fellow citizens
in Florence. Moreover, informers do not get paid until the government has
actually collected the tax; in our litigious and procedurally deliberate society,
that can easily be a decade after the informer’s tip. Some of the Florentine
proceedings which I have read indicate that during the Quatrocento the payment was made within months of the denunciation.
We are told that there were “hundreds” of denunciations in Florence from
1427 to 1434.33 If that amounts to only 20 per year, that is 1% of the 1800
families with positive tax base. While the Service does not tell use the number of informers’ tips which it receives, it must be far less than 1% of the
tax returns filed in this country, even if we limit the count to returns with
substantial income reported. So a question is, if the Florentine experience a
basis for urging greater reliance on informers to enforce the income tax laws
of the United States?
On this question my magnet has a repelling polarity. Americans have a
strong aversion to stool pigeons. We are shocked by the efforts of the Peoples’
Republic of China to induce its citizens to report one another. I do not believe
that the evidence from Florence in the 1420’s and 1430’s makes a compelling
argument that Congress should authorize increased reliance on informers in
this country. What we need instead is greater audit coverage.
Finally, the Florentine Quatrocento experience should be a lesson to those
who are responsible for perpetrating a federal government deficit equal to 10%
to 20% of federal government revenues. Our deficit, in relation to “normal”
tax revenues of the federal government, is only about one third as large as the
Florentine deficit. We do not have forced loans and a dual interest rate structure, at least not yet. We do not have tax rates which are causing our middle
class families to lose their life savings. But, like the Florentines, we are willing
to live substantially beyond our means and to build an ever-larger public debt
in order to do so. This may have substantial and unpredictable consequences
on our freedoms; the same type of consequences that Florentines experienced
but were unaware of while the debt was allowed to build.
See supra note 19.
33 Tax Lawyer, Vol. 68, No. 1