The U.S. Supreme Court case Department of Revenue of Kentucky, et al. v. George W. Davis, ET UX (2007) dealt with the issue of whether a state tax law that favored in-state municipal bonds over out-of-state ones violated the Commerce Clause of the Constitution which prohibits states from passing laws that discriminate against interstate commerce. The Davises, residents and taxpayers in Kentucky, filed suit claiming this discrimination after they were taxed on interest earned from out-of-state municipal bonds but not on those purchased within Kentucky. However, the court ruled 7-2 in favor of Kentucky's Department Of Revenue stating that there was no violation as it did not hinder free trade among states nor did it provide commercial advantages to local businesses at their competitors' expense outside state lines.

In the dissenting opinion for Department of Revenue of Kentucky v. Davis, Justice Alito argued that the majority's decision to uphold a state law giving tax breaks only to in-state municipal bonds was inconsistent with previous rulings on interstate commerce. He contended that this ruling allowed states to discriminate against out-of-state economic interests, which is contrary to the Commerce Clause's purpose of preventing such protectionist measures. Furthermore, he disagreed with the majority’s view that there was a long-standing tradition allowing these types of laws and pointed out that many other states do not have similar provisions. Lastly, he expressed concern about potential negative consequences from this ruling as it could encourage more discriminatory state legislation.