In the 1944 case City of Cleveland v. United States et al., the Supreme Court ruled that a city-owned airport was not exempt from federal taxation. The City of Cleveland had purchased bonds to finance improvements at its municipal airport, and argued that as a municipality it should be immune from paying federal taxes on those bonds under the doctrine of intergovernmental tax immunity. However, the court disagreed with this argument, stating that while states have certain immunities against direct taxation by Congress, these do not extend to their political subdivisions such as cities or counties unless explicitly stated in legislation. Therefore, they held that income derived from municipal bonds issued for public purposes is subject to federal income tax.

In the dissenting opinion for City of Cleveland v. United States et al., Justice Murphy argued that the federal government had overstepped its bounds by interfering with local affairs, specifically in relation to taxation and property rights. He contended that this case was not about whether a city could tax an airport but rather if it could tax property within its own boundaries. He believed that Congress did not have the authority to exempt federal properties from local taxes as it would infrive on states' rights and disrupt balance between state and federal powers. Furthermore, he expressed concern about potential consequences of such interference, including financial burdens placed on cities unable to collect taxes from federally-owned properties within their jurisdictions.