Taxation and Public Finances

Florence’s economy was affected in important ways by the government’s fiscal policies. In the thirteenth century communal expenditures were limited, except in times of war when a direct tax based on assessments (“estimo”) of the worth of each citizen’s property was occasionally collected, as, for example, during the war against Arezzo and Pisa in the late 1280s. Direct taxes were always unpopular among the wealthy and were resorted to only sporadically when unusual expenses exceeded regular communal revenues. In 1315 the estimo was abolished for city residents (but maintained in the contado), as the elite-dominated government decided to base its finances on a combination of indirect (or consumption) taxes and borrowing.117 This was a political decision, made by, and in the interests of, the class of wealthy merchants and property owners. The priorate that presented the proposal for the abolition of the estimo to the legislative councils included members of the merchant-banking families of the Alberti, Altoviti, Rucellai, and Ricci, and they had been elected by their predecessors who included members of the Soderini, Peruzzi, Acciaiuoli, and Medici families. The elite evidently assumed that economic growth would generate sufficient revenues through indirect taxes to pay the interest on the loans the government regularly needed. But receipts from indirect taxes, impressive as they were in good times, had their limits, and attempts to squeeze more revenue from such taxes with higher rates restricted consumption, thus undermining the prosperity of the economy and ultimately reducing revenues. At the same time, government borrowing could only be successful if loans were repaid promptly with the promised interest. In fiscal emergencies the commune borrowed more, often at higher rates of interest, only to find itself saddled with a growing debt and ever larger interest obligations, which necessitated more borrowing and put more pressure on indirect taxes. The elite’s rejection of direct taxation, which would have limited the need to borrow and resulted in a smaller debt, meant that the commune’s solvency required a flourishing economy and avoidance of too many years of higher than normal expenditures. But the emerging competition for hegemony in Tuscany made it difficult to avoid war, and it was indeed military expenses that proved the undoing of a fiscal system based on loans and indirect taxes.

By the end of the thirteenth century, indirect taxes (gabelles) were already the commune’s major ordinary source of revenue. No estimates of “normal” government spending or income survive from this early period. For the mid-1330s, Villani (12.92) estimated regular annual income (excluding loans) at about 300,000 florins, half of which came from the two most lucrative gabelles:

90.000  florins from goods entering the city (the gate gabelle) and 59,000 florins from the tax on wine sold at retail. Other indirect taxes included the gabelle on the slaughter of animals (15,000); required purchases of salt (15,000); contracts and notarized documents (11,000); the grinding of grain into flour (4,250); the slaughter of animals in the contado (4,400); pawnbrokers’ licenses (3,000); and taxes on renters of communal property (4,150) and on citizens accepting high-ranking offices in other cities (3,500). Other major sources of revenue were the estimo on the contado (30,000 florins) and fines collected through the courts (20,000).

In reviewing communal finances, Villani included among ordinary expenditures (12.93) only the “stable and necessary” costs of 40,000 florins associated with a long list of judicial and administrative offices. He omitted other, far greater, expenditures because they fluctuated so much from year to year, above all military expenses and the cost of “the walls, bridges, and [the cathedral of] Santa Reparata.” Nor did he mention among these ordinary expenses interest payments on loans. But just a few pages earlier (12.90) he reported that in two and a half years of war against the Della Scala of Verona in the late 1330s the commune spent more than 600,000 florins and still owed

450.000  florins, which, assuming conservatively an average of 10% interest, meant annual interest payments of 45,000 florins. He added (without specifying which ones) that gabelle receipts for the next six years were assigned to the repayment of this debt. In these war years, the combination of military costs, interest payments, and ordinary administrative expenses already exceeded regular annual income, and this did not include the walls, bridges, cathedral, or grain purchases. This was (and long remained) the dilemma of Florentine public finance: any period of protracted and costly military expenditures instantly created deficits that could only be covered by borrowing at high interest rates, which in turn made it necessary to increase the rates at which the gabelles were collected. And when people had to pay more for the necessities of daily life, they bought less, if not of these necessities then of something else, or fell into debt themselves, and the economy weakened.

Gabelles are an inherently regressive form of taxation, whose burden falls more heavily on the poor and working classes. Moreover, the rates were increased, in some cases dramatically, from the late thirteenth through the fourteenth century.118 The only exception is the gate gabelle on grain, which decreased in the early fourteenth century and otherwise remained steady at 12 denari per staio. The gate gabelle on oil went from 3 soldi per orcio (an 85-pound barrel) in the 1320s to 15 in the second half of the century. The tariff on hogs brought into the city increased from 6 to 60 soldi per head between the 1330s and the 1350s and settled at 40 in the 1370s. And the gate tax on wine (separate from the tax on its retail sale) went from 10 soldi per cogno in 1320 to 60 in the 1350s, and thereafter settled at 50. The tax on wine sold retail went from 6% of the sale price in 1299 to 33% in 1342, and 40-50% after the 1348 plague. As a consequence of the two taxes on wine, its retail price reached levels nine and ten times higher in the 1350s than at the beginning of the century. The commune required each household to buy prescribed quantities of salt and raised both mandated quantities and the per-unit tax, with the result that its price increased from 6-12 soldi per staio in the 1290s to 20-40 in the 1330s, and 80-120 after 1350. In most cases the biggest percentage increases occurred before the plague and put growing pressure on the working classes for whom the added cost of items of daily consumption represented a significant percentage of household budgets at a time when wages were stagnant. According to Villani (10.324), in 1325, during a major war against Lucca, a combination of new taxes and higher rates increased gabelle revenues from 180,000 to 250,000 florins in one year. In the early fourteenth century, the commune generally sold gabelle receipts in advance of their collection, either to individuals or, in the case of the retail sale of wine, to the guild of the Vinattieri, for an agreed-upon price, and the expected profit for the purchaser further increased the burden on consumers. By mid-century the government abandoned this practice and collected gabelles directly through its own officials.

Elite-led governments financed military expenses through loans repaid with interest. Loans could be general or restricted, required or voluntary. General compulsory loans (prestanze) were assessed on all households. Citizens paying their full assessments on schedule became creditors of the commune with the right of repayment with interest. Some (but not all) forced loans were repaid, but repayment often required another loan. The government paid interest when it could but often suspended interest payments when funds were more urgently needed elsewhere. Citizens paying less than their full assessments lost the right to interest, and for these less affluent households the loans thus became direct taxes. Restricted loans were assessed on select groups of wealthy merchants, or their companies, and their repayment, with annualized rates of interest of 10 or 15 percent, was guaranteed in advance by the assignment of specified communal revenues, usually gabelles (as in the case noted by Villani). Such loans were sometimes voluntary, in which case interest rates were even higher. Before about 1340, for as long as the commune was able to repay restricted loans on schedule, they were a secure and lucrative form of investment for the wealthy. Moreover, the commune often delegated responsibility for their collection and repayment to special committees on which major creditors themselves served and were thus able to arrange terms of repayment and interest for their own loans.

The assessment of prestanze was an endlessly contentious issue. To impose a forced loan, the priors sought authority from the councils to assess an overall amount to be divided among the city’s districts. Separate committees of assessors were appointed in the sesti (and, after the reorganization of 1343, in the sixteen gonfaloni). In the 1320s, these committees consisted of forty members in each of the two most populous sesti (Oltrarno and San Piero Scheraggio) and thirty in each of the other four, each being divided into five smaller ones, all of which went to work separately and in secret to determine each household’s share of the total amount to be raised in their district. Five sub-committees each produced an estimate for every household: the highest and lowest were rejected and the average of the middle three was the amount assessed. The multiplicity of committees was designed to diminish the corruption and favor-itisms to which any assessment of fiscal burdens of neighbors by neighbors was vulnerable and made it difficult to blame, and therefore seek revenge against, a specific individual for one’s assessment. But this did not of course eliminate complaints about unfair treatment.

After the abolition of direct taxation in the city in 1315, government borrowing and the public debt grew steadily. In the mid-1320s, war against Lucca and its ruler, Castruccio Castracani, created the first of many fiscal crises. For several years the two cities dueled for control of Tuscany, and in 1324-5 the war went badly for Florence as Castruccio’s armies rampaged through Florentine territory, sometimes very close to the city, whose new walls were not yet completed. In September 1325 Florence suffered a devastating defeat at Altopascio (east of Lucca), and that November the government imposed the new indirect taxes that increased gabelle receipts by almost 40%. Short-term restricted loans of 28,000 and 20,000 florins, assessed in June-July 1325, were to be repaid with interest of 8 percent from the salt and contract gabelles. Prestanze were also levied to finance both military expenditures and the shortterm loans from wealthy families and companies: a 41,000-florin prestanza in June 1325, and another for 50,000 florins in February 1326, which was to be used, among other things, to pay off a short-term 15,000-florin loan advanced by a select group of companies including the Bardi, Peruzzi, Scali, Acciaiuoli, and Alberti. No one with estimated wealth of less than 1,000 lire (approximately 320 florins) was meant to be obligated to this prestanza. The register for San Piero Scheraggio shows that 390 of the sesto’s 561 assessed households paid between 4 and 10 florins, 41 paid less than 4, and the remaining 130 between 10 and 123 florins. With 561 households contributing in this one district, as many as 3,000 must have been assessed throughout the city, which means that, if this prestanza did not reach the working classes or poorest

Artisans, it certainly went beyond the elite. Lucrative short-term loans extended by members of elite families were being repaid with handsome interest from the receipts of both regressive indirect taxes, whose burden fell most heavily on the working class, and forced loans largely collected from the popolo and the guild community.

In 1325 military and financial crises induced the elite to seek help from its traditional ally in the South, the Angevin kingdom of Naples. King Robert sent his son Charles, duke of Calabria, to assume emergency powers in Florence. In July 1326 Charles and his wife were given a lavish formal entry, together with more than twenty princes, counts, and lords (all named by Villani, who was evidently very impressed by this show of royal, noble, and feudal ritual), Charles’s 1,500 knights and 400 more in the service of his vicar, Walter of Brienne. The Florentines made Charles lord, or signore, of Florence for ten years, with the conditions that he respect the city’s laws and elected officeholders and not “impose any forced loans or direct taxes except in conditions of urgent necessity,” and even then only “with the advice, agreement, and decision of the priors and the councils.” Charles did exactly what they feared. He began with a new prestanza of 60,000 florins in August 1326, which was, however, distributed according to new criteria that required the wealthy to pay more than they had in previous prestanze. Then in October he reinstituted the estimo by a ducal decree for which he did not seek the approval of the councils. Lamenting the “iniquities” and “inequalities” of a fiscal system in which “the poor and powerless are unjustly compelled to sustain the burdens of the powerful and wealthy,”31 Charles appointed a committee of foreign judges to assess the wealth, including property, capital investments, and credits, of every citizen in the city, contado, and district. Most remarkably, graduated tax rates were applied to various categories of wealth: 0.83% on houses; 1.25% on other landed property; 1.66% on investments and credits; and a progressive scale of rates for business profits that went from 1.66% to more than 5% for profits over the modest sum of 100 lire. And these taxes were collected as frequently as was deemed necessary: a first collection in March 1327, which Villani (11.17) says brought in 80,000 florins; a second six months later; and a third in 1328. These were direct taxes, not forced loans, and hence without either repayment or interest. Charles and his advisers evidently believed that the only solution to Florence’s fiscal dilemma was direct taxation of capital and profits as well as real property. The reform’s explicit intention was to relieve the burden of gabelles and forced loans on the working classes, artisans, and the poor.

The warmth with which Charles had been welcomed in 1326 quickly turned to hostility among the elite families who detested his fiscal reforms. Open

Conflict was averted by Charles’s sudden death in November 1328, and within three months a new elite government once again abolished the estimo. Resentment against Charles also focused on his own apparently limitless spending. Villani estimated that, in the nineteen months between mid-1326 and January 1328, the Florentines paid a grand total of 900,000 florins to cover Charles’s military and other expenses (which still did not bring victory over Castruccio, who, however, fortunately for Florence, also died in the autumn of 1328), a sum so huge that Villani felt it necessary to confirm its validity by telling his readers that “I can in truth testify to it, because I was among the communal auditors.” A comparison is possible here. A treasury audit for 1325 (the year of the military disaster at Altopascio and before Charles assumed power) concluded that expenditures amounted to 1,104,276 lire, roughly 340,000 florins, of which almost 79% went for military expenses. If Villani is right, the Florentines paid Charles 67% more than that on an annualized basis (568,000 florins) over those nineteen months. In January 1328, shortly after Charles left Florence for what was meant to be a temporary absence, the priors wrote a letter to the community of Florentine merchants in Naples, perhaps hoping that its contents would reach the court. They lamented the condition of the republic’s finances: “You know that the gabelles are assigned to the duke’s officials to pay the 200,000 florins [that they agreed to provide him each year, before other subsidies]. Since the duke came here, besides the gabelles, there was a forced loan of 60,000 florins; then the estimo was instituted and 120,000 florins came from two collections. And every old communal tax and source of income has been squeezed as much as possible.” The priors bemoaned their inability to find the 10,000 florins needed to keep the construction of the walls going, or even enough money with which to pay the salaries of the podesta, Capitano, and other officials. “Think about it,” they added: “We used to be able to keep a thousand cavalry for slightly more than 100,000 florins. Now [under the duke’s rule] a thousand cavalry cost us 200,000 florins. And think of this: what ever would we do if something unexpected happened that caused our gabelles not to yield the usual amounts?”32 Although their successors might have asked the same question with even greater urgency after the estimo was again abolished in early 1329, for the next decade a prosperous economy kept gabelle receipts high. But by 1340 the Florentines did indeed have to face the dreaded contingency pondered by the priors of January 1328.