The U.S. Supreme Court case Davis v. Michigan Department of the Treasury (1988) revolved around a dispute over tax law and discrimination against federal retirees. The state of Michigan had been taxing retirement benefits from federal pensions while exempting those from state and local government pensions, which Paul Davis argued was in violation of 4 U.S.C §111 - a statute that protects federal employees' compensation from discriminatory taxation by states. The court ruled in favor of Davis, stating that the differential treatment constituted an unconstitutional infringement on intergovernmental tax immunity as it discriminated against former Federal employees based on the source of their income. This decision led to significant financial implications for many states who were similarly taxing public sector pension incomes differently.

In the dissenting opinion for Davis v. Michigan Department of the Treasury, Justice Blackmun argued that the majority's decision to strike down a state tax law as discriminatory against federal retirees was an overreach of judicial power. He contended that it is not within the Court’s purview to decide whether or not a state tax law discriminates against federal employees; rather, this should be left up to Congress and individual states. Furthermore, he disagreed with the majority's interpretation of 4 U.S.C §111, arguing that it does not provide clear protection from discrimination for retired federal employees in relation to taxation on their retirement benefits. In his view, if Congress intended such protections they would have been explicitly stated in legislation.