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Where did the last name Katz originate from?

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The story I heard is that in the middle ages, when surnames first started, a surname was purchased from the local Duke. Jews in the priest tribe, Cohen, wanted that as their last name. The Dukes saw a strong market and jacked up the price. To avoid the surcharge some purchased the name Katz as shorthand for Priest of Rightousness: "Cohen Tzedeck."

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