The need to build fiscal capacity in the territories that gained independence from the Holy Roman Empire after 1000 lead to the emergence of political entities with more inclusive economic institutions. The long term exposure to higher individual freedom (of economic and political initiative) and more productive public policies affected the economic and political attitudes of the affected population and their descendants that persist still today. We test this hypothesis in reduced form by reconstructing the political history of each location in Italy. To this end, we build a yearly panel with the emergence and changing borders of each political domination in Italy for the period 1000-1800. The results document that in the municipalities that belonged to these new political entities, current tax evasion is significantly lower, that the effect increases with the duration of independence, and the effect is stronger in those places that first achieved independence with respect to places annexed later.