In the 1913 case of Clement National Bank v. State of Vermont, the U.S. Supreme Court ruled that a state could not tax national banks based on their capital and surplus without violating federal law. The bank argued that it was being unfairly taxed by the state because its taxation method included both capital stock and surplus in calculating taxes owed, which was contrary to federal statutes limiting such taxation to shares only. The court agreed with this argument, stating that under Federal law (Revised Statutes §5219), states were allowed to tax shareholders on income from their shares but not directly tax national banks themselves based on their total assets or profits. Therefore, Vermont's method of taxing exceeded what was permissible under federal statute and thus violated supremacy clause principles.

In the dissenting opinion for Clement National Bank v. State of Vermont, Justice Holmes disagreed with the majority's interpretation that a national bank could not be taxed by a state on shares held by non-residents. He argued that there was no constitutional or statutory provision preventing such taxation and emphasized the importance of states' rights to tax property within their jurisdiction. Furthermore, he contended that this case did not involve double taxation as feared by the majority because each state had its own separate interest in taxing these shares - one due to residency and another due to location of property. Therefore, according to him, it would be unjustifiable for federal law to interfere with Vermont's right to impose taxes on these grounds.