In the 1905 case of Carter v. Hawaii, the United States Supreme Court was asked to determine whether a Hawaiian law that taxed sugar plantations based on their annual production violated the U.S. Constitution's Equal Protection Clause. The plaintiff, George R. Carter, argued that this tax unfairly targeted his plantation and others like it while exempting other types of businesses from similar taxation levels. However, the court ruled in favor of Hawaii by upholding its right to levy taxes as it saw fit under its territorial government status granted by Congress in 1898 following annexation from Spain. The justices stated that such taxing power did not violate any constitutional principles because it fell within a state or territory’s rights to manage its own internal affairs without federal interference unless explicitly prohibited by law or constitutionally unsound practices were involved.

The dissenting opinion in the Carter v. Hawaii case argued that the Supreme Court should not have jurisdiction over this matter, as it was essentially a dispute between private parties about land ownership. The justice contended that while one party claimed to own the land through a royal patent granted by Hawaiian monarchs before annexation, and another party claimed ownership based on laws passed after annexation, these were issues of local law best settled by Hawaiian courts. He also disagreed with the majority's interpretation of an 1898 resolution which stated that all property owned by Hawaii prior to annexation would remain its property afterwards; he believed this only applied to public lands held for common use (like roads or parks), not privately-owned lands like those at issue in this case. Finally, he expressed concern about setting a precedent where U.S federal courts could interfere in state matters whenever there was some alleged conflict with federal law or policy.