In the case of Illinois ex rel. Gordon v. Campbell, the Supreme Court ruled in 1946 that federal tax liens have priority over state claims for unpaid wages when a company goes bankrupt. The State of Illinois had argued that its claim to recover unpaid wages on behalf of workers should take precedence over the federal government's claim for unpaid taxes under an act passed by Congress during World War II, which gave priority to wage claims in bankruptcy proceedings. However, the court held that this act did not apply because it was intended only as a temporary measure and had expired before the bankruptcy proceeding began. Therefore, according to established principles of law giving preference to federal claims over state ones (the doctrine of "federal supremacy"), the government's tax lien took precedence.

In the dissenting opinion for Illinois ex rel. Gordon v. Campbell, Justice Frankfurter argued that the majority's decision was a departure from established principles of federalism and comity between state and federal governments. He contended that the case should not have been dismissed on procedural grounds because it raised important questions about whether states could protect their own tax revenues from being diminished by federal taxation of unemployment compensation benefits paid out by state funds. In his view, this issue implicated fundamental issues of sovereignty and fiscal autonomy for states under our system of dual governance. Furthermore, he disagreed with the majority's interpretation of relevant statutory provisions as allowing such double taxation to occur without clear congressional intent to do so.