In the case of District of Columbia v. Bailey, 1897, the United States Supreme Court ruled on a dispute involving property rights and taxation in Washington D.C. The plaintiff, Bailey, had purchased land from the federal government which was exempt from local taxes as it was owned by the U.S. However, after purchasing this land he received a tax bill from the District of Columbia for unpaid back-taxes that accrued during its ownership by the federal government. Bailey argued that since his property was federally-owned at that time and therefore not subject to local taxes then he should not be held responsible for those past due amounts. The Supreme Court agreed with him stating that while states have broad powers to levy taxes they cannot impose them retroactively especially when previous owners were legally exempted from such obligations under existing laws or agreements. Therefore any attempt by DC authorities to collect these back-taxes would constitute an unlawful taking without just compensation violating Fifth Amendment protections against such actions.

In the dissenting opinion for District of Columbia v. Bailey, it was argued that the majority's decision to uphold a tax on personal property located outside of Washington D.C., but owned by D.C. residents, was unconstitutional and violated principles of jurisdictional sovereignty. The dissenting justices contended that such taxation overstepped boundaries as it imposed taxes on properties situated in other states where the District has no authority or control. They maintained that this action contradicted established legal principles which dictate that personal property is subject to taxation only within its physical location unless otherwise provided by law. Furthermore, they expressed concerns about potential double-taxation issues arising from this ruling since these properties could also be taxed in their respective states leading to an unfair burden on taxpayers who are residents of D.C.