In the 1930 case of Klein v. Board of Tax Supervisors of Jefferson County, Kentucky, the U.S. Supreme Court was tasked with determining whether a tax assessment on shares held by a resident in foreign corporations violated due process under the Fourteenth Amendment. The plaintiff argued that because these companies did not have property or do business within Kentucky, it was unconstitutional for their shares to be taxed there. However, the court disagreed and upheld the state's right to tax such holdings based on where their owner resided rather than where they were issued or physically located. This decision reinforced states' rights to levy taxes as they see fit unless explicitly prohibited by federal law or constitutionally protected rights.

In the dissenting opinion for Klein v. Board of Tax Supervisors of Jefferson County, Kentucky, Justice Stone argued that the majority's decision was inconsistent with previous rulings and principles regarding taxation. He contended that a state has no constitutional obligation to provide tax exemptions for federal securities or their income. Furthermore, he disagreed with the majority's view that taxing income derived from such securities indirectly taxed them; instead, he saw it as a direct tax on personal property or income rather than an indirect one on contractual rights created by ownership of government bonds. The justice also pointed out inconsistencies in how different types of incomes were treated under this ruling and warned against using judicial power to create economic policy through selective interpretation of constitutional provisions.