In the 1890 case of Lawrence v. Rector, the U.S. Supreme Court was tasked with determining whether a land grant made by Congress to aid in the construction of railroads could be taxed by states before it had been sold or used for railroad purposes. The court ruled that such lands were not exempt from state taxation, overturning an Arkansas Supreme Court decision which held otherwise. The federal government's intent when granting these lands was to encourage their sale and development as quickly as possible; therefore, allowing them to remain untaxed would contradict this purpose by discouraging rapid sale and settlement. Furthermore, since these lands were granted without any express condition of exemption from taxation until they should be sold or used for railroad purposes, there is no basis upon which such an exemption can be implied.

In the dissenting opinion for Lawrence v. Rector, Justice Field disagreed with the majority's decision that a state could tax federal bonds. He argued that this violated the Supremacy Clause of the Constitution, which states that federal law is supreme over state law. According to Justice Field, allowing states to tax these bonds would give them power over federal financial operations and potentially disrupt national economic stability. He also pointed out inconsistencies in previous court decisions regarding taxation of government securities and emphasized his belief in maintaining clear boundaries between state and federal powers as intended by the framers of the Constitution.