Fiscal Innovation Gone Bad: Comprehensive Business Censuses from the Florentine 1427, 1433, and 1458 <i>Catasti</i>

The first descriptive purpose of this article is to document changes in the industrial composition of Renaissance Florence through business censuses that we have extracted from household-wealth declarations in the 1427, 1433, and 1458 Florentine catasti (tax censuses). These consecutive censuses reveal a decline in the number of businesses in many but not all of the industries in Florence over this thirty-year period. The second purpose of this article is to explain this economic decline. We find, through both quantitative and qualitative evidence, that the innovative tax catasti themselves were to blame: they all too effectively extracted enormous levels of taxes from the wealthy Florentine population in order to fund mercenary wars related to the emergence of Italian Renaissance regional or “territorial” states. The economic decline was due not only to the direct effect of heavy taxes but also to the indirect effect of default contagion among highly leveraged companies doing business with each other on credit. This case study contradicts the rosy portrait in the social science literature of a positive relationship between state formation and economic growth. We show that newly emergent Italian Renaissance regional states did not always produce positive economic gains for the capital cities that constructed them. This raises questions about economic self-interest explanations of that expansion. An important corollary for Florentine political history is our finding that this economic slump contributed structurally to the political rise of Cosimo de’ Medici through drastic contraction and concentration in the domestic banking industry.