In the 1907 case of Galveston, Harrisburg and San Antonio Railway Company v. State of Texas, the U.S. Supreme Court ruled in favor of the state of Texas. The dispute arose when a railway company claimed that it was exempt from taxation based on an agreement made with the state in 1881. However, this claim was contested by Texas which argued that such exemption would be unconstitutional under its law as it would constitute a contract impairing its power to tax property within its jurisdiction equally and uniformly for public purposes. The court sided with Texas stating that no legislature can bargain away the police power or taxing power of a state because these are inherent attributes necessary for governance and cannot be surrendered or contracted away even if there is explicit legislative intent to do so.

In the dissenting opinion for Galveston, Harrisburg and San Antonio Railway Company v. State of Texas, Justice Harlan disagreed with the majority's ruling that a state could regulate interstate commerce rates within its borders. He argued that this decision violated the Commerce Clause of the U.S. Constitution which grants Congress exclusive power to regulate interstate commerce. Harlan believed that allowing states to set their own rates would lead to inconsistencies and conflicts between different jurisdictions, disrupting smooth trade across state lines. Furthermore, he contended that it was not feasible or practical for each state to have separate regulations on such matters as it would create confusion and uncertainty in commercial transactions involving multiple states.