The U.S. Supreme Court case McNair, Receiver v. Knott, Treasurer of Florida et al., 1937 revolved around a dispute over the constitutionality of a law passed by the state legislature in Florida that reduced interest rates on bonds issued by special tax districts from 6% to 4%. The plaintiff, who was a bondholder and receiver for one such district, argued that this legislation violated the contract clause of the Constitution because it retroactively altered terms agreed upon at issuance. However, the Supreme Court ruled against him unanimously. They held that since these were not private contracts but public ones involving taxation powers - which cannot be contracted away - there was no violation of constitutional rights involved with changing their terms through legislative action.

In the dissenting opinion for McNair v. Knott, Justice Butler argued that Florida's tax exemption on federal bonds was unconstitutional because it violated the Supremacy Clause of the Constitution. He believed that states do not have the power to impose taxes on obligations or securities issued by the United States government as this would interfere with its borrowing powers and fiscal operations. Furthermore, he contended that such a tax could potentially lead to discrimination against federal securities in favor of state-issued ones which is contrary to constitutional principles. Therefore, according to him, Florida’s taxation scheme should be struck down as it infringes upon national supremacy and interferes with federal financial functions.