The Farmers' and Traders' Bank of Owensboro v. Owensboro case in 1898 revolved around a dispute between the bank and the city regarding taxation. The bank claimed that it was exempt from certain taxes under its charter, which had been granted by Kentucky's legislature in 1859. However, the City of Owensboro argued that an amendment to Kentucky’s constitution in 1891 removed this tax exemption privilege for banks chartered prior to its enactment. The U.S Supreme Court ruled against the bank, stating that while contracts are generally protected from impairment by state law under Article I Section 10 of the Constitution (the Contract Clause), states have inherent power to alter their own institutions without federal interference unless specifically prohibited by constitutional provisions or acts of Congress. Therefore, despite having a contract with specific terms about taxation at its inception, changes made later on through legitimate legislative processes could affect those terms.

In the dissenting opinion for Farmers' and Traders' Bank of Owensboro v. Owensboro, Justice Harlan argued that the majority's decision was inconsistent with previous rulings regarding taxation on national banks. He contended that a state could not tax a national bank more heavily than it taxed other moneyed capital in the hands of individual citizens within its jurisdiction. The majority’s ruling allowed states to impose heavier taxes on national banks by considering their shares as real estate rather than personal property, which contradicted earlier decisions made by the court. Harlan believed this interpretation undermined federal law designed to protect these institutions from discriminatory state taxation and threatened their existence. Furthermore, he expressed concern over potential negative impacts on local economies due to increased financial burdens placed upon such banks.