In the case of King County, Washington v. Seattle School District No. 1 in 1923, the Supreme Court ruled on a dispute over property taxation between a county and its school district. The Seattle School District had issued bonds to finance construction projects and argued that these bonds should be exempt from local property taxes under state law because they were being used for public purposes. However, King County contended that it was entitled to tax all real estate within its jurisdiction regardless of how it was being used. The Supreme Court sided with the school district, ruling that states have broad authority to determine what types of property are subject to taxation and can choose to exempt certain categories if they see fit. In this instance, since Washington State law provided an exemption for properties used for public purposes like education, this meant that the school district's bonds could not be taxed by the county. This decision affirmed principles of federalism by recognizing states' power over local affairs while also highlighting how different levels of government must navigate their overlapping authorities when it comes to issues like taxation.

In the dissenting opinion for King County, Washington v. Seattle School District No. 1, Justice Holmes argued that the majority's decision to prevent a school district from levying taxes beyond its constitutional limit was an overreach of judicial power. He contended that it should be up to local authorities and voters to determine how much they are willing to tax themselves for public education purposes, not the courts. Furthermore, he believed this case did not present a federal question as it involved interpretation of state law rather than federal constitution or laws; thus making it inappropriate for Supreme Court review under principles of federalism and comity among states. In his view, if there were any irregularities in taxation process or amounts levied by school districts these should be addressed by state courts applying their own laws rather than being second-guessed by U.S Supreme Court on basis of due process clause which he thought had no relevance here.