Medici Money: Banking, metaphysics and art in fifteenth-century Florence

IT’S 1426 AND once again the coffers are empty, the city’s debt is spiraling. Since the way of the world is that government is in the hands of florin people, it is piccioli people who end up paying most of the taxes. There are more of them. Paying a larger proportion of their wealth than the rich, they are discouraged from social climbing and the natural order of things is maintained. After an attempt to impose direct and proportional taxation a century before, in the idealistic days of the early republic, most taxation is now indirect. Carry a bucket of fish to town, you’re taxed. Bring a cart of wheat to mill, you’re taxed. The city walls are not just there to keep out enemies. As in Masaccio’s, The Tribute Money, the tax collector waits at the gate. And don’t try to hide that goose under your cloak, because he will check!

But it’s not enough. Yes, there are plenty of piccioli people, but as we recall, it takes 80 or 90 piccioli to make a florin. And quite a few thousand florins to pay a mercenary army. During the thirteenth and fourteenth centuries, since the wealthy really did not want to give anything away, the government experimented with loans. The merchant, or banker, puts a handsome sum in the public coffers and collects a handsome interest rate (or gift) in return. Officially, it is just 5 percent, but as an incentive to lend to the state, you get 300 florins’ worth of debt certificates for every 100 florins paid. So really you’re earning 15 percent. The indirect taxes that the plebs are paying on salt and eggs and meat and wine and fats and oils are now funding the interest rates of the better folk who put down their lump sums years before. It’s charming but it can’t last. It doesn’t add up. Mid-fourteenth century, the public debt has to be consolidated. The government announces that from now on, interest returns on tax loans will only be paid when and to the extent possible. As a result, disappointed lenders in need of ready cash start selling their debt bonds to those speculators who can wait. The Dominicans say this is usury and the Franciscans say it is not. What do we have different religious orders for, if not for a second opinion?

In the early fifteenth century, the Florentine branch of the Medici bank became a major dealer in debt bonds, which by 1426 were trading at only 20 to 35 percent of face value. Clearly, the idea of the government’s ever paying the interest was now considered a very long shot. The days of the willing lender were over. The government did try to raise money through forced rather than freely granted loans. The trick here was that if you agreed not to collect the interest, the amount you were asked for was drastically reduced. But in the end, these makeshifts just weren’t enough. When people paid the full amount and wanted interest, the government couldn’t pay. When they took the cheaper option, the income wasn’t enough. And now there really is no more money to be squeezed out of the plebs. People are starving. The time has come to make the rich pay.

Two figures are presently manipulating the officially republican government: Rinaldo degli Albizzi, head of a rich landowning family, and the aging, highly respected Niccolò da Uzzano. Together they introduce the so-called catasto, or register. Every three years, every family in Florence will present a declaration listing all property, investments, and incomes. Certain deductions are allowed, certain complex calculations are made of the value of land worked by tenant farmers who pay rent in kind. For each declaration, a so-called sovrabbondanza—or excess of what is strictly necessary for staying alive — is established, and when the government needs money it taxes everybody 0.5 percent of that value. This wouldn’t be too much if it were only collected once a year, but it could be demanded twice, or even three times a year. In 1427, 10,171 families make declarations and 2,924 are immediately exempted from any payment at all because miserabili.

The poor are thrilled. Taxation in proportion to ability to pay! At last. The big landowners complain that just because they hold property does not mean that they have the florins ready to pay the taxes on it. Many landowners do indeed find themselves having to sell land to pay what’s asked of them. The merchants, on the other hand, are furious about having to declare liquid assets. Cash is here today, gone tomorrow, and easily hidden, they point out. All the law does is encourage evasion and the flight of capital — through the Medici bank, for example — while discouraging local investment. As soon as the law is enacted, almost all Florentine businessmen set about making false declarations. “For love of the taxman,” a silk merchant’s accountant writes ironically on the opening page of some rigged books. One Medici director invests sums in his own bank under three false names.