In the 1930 case of Alabama v. United States, the state of Alabama sought to prevent the federal government from collecting income taxes within its borders. The Supreme Court ruled against Alabama, stating that under Article I, Section 8 of the Constitution, Congress has broad powers to tax and spend for general welfare purposes. This includes levying an income tax on individuals residing in any state or territory without needing permission from individual states. The court also noted that this power is not limited by any provision in Section 10 which restricts states' abilities to interfere with contractual obligations. Therefore, it was concluded that a state cannot impede or obstruct lawful actions taken by Congress under its constitutional authority.

In the dissenting opinion for Alabama v. United States, 1930, Justice Stone argued that the state of Alabama should have been allowed to sue the federal government over a dispute involving coal lands in Alabama. He believed that states should be able to protect their interests and those of their citizens by bringing suits against the federal government when necessary. In this case, he felt that Alabama had a valid claim because it was seeking compensation for coal lands taken by the U.S. Government during World War I under an act of Congress which provided no compensation to landowners if minerals were removed from their property while it was being used or occupied by the United States during wartime operations. The majority ruled against allowing such lawsuits on grounds of sovereign immunity; however, Justice Stone disagreed with this interpretation and thought it unjustly limited states' rights.