In the 1896 case of Merchants' and Manufacturers' Bank v. Pennsylvania, the U.S. Supreme Court ruled on a dispute over taxation between a national bank and the state of Pennsylvania. The court held that under federal law, states could not tax national banks more heavily than other types of corporations within their jurisdiction. The decision was based on an interpretation of Section 5219 of the Revised Statutes which stated that no state could impose taxes on shares in any national banking association located outside its borders if it did not also tax other moneyed capital coming into the state for investment in bonds or stocks not taxed at home. In this particular case, Pennsylvania had imposed higher taxes on out-of-state banks compared to local ones, leading to claims from Merchants’ and Manufacturers’ Bank that such practice was discriminatory and violated federal law.

In the dissenting opinion for Merchants' and Manufacturers' Bank v. Pennsylvania, it was argued that the tax imposed by Pennsylvania on out-of-state banks violated the Commerce Clause of the U.S. Constitution because it discriminated against interstate commerce. The justice believed that a state cannot impose a higher tax rate on foreign corporations than it does on domestic ones as this would unfairly burden those engaged in interstate trade and could potentially lead to economic protectionism at a state level, which is contrary to federal law and policy. Furthermore, they contended that such discriminatory taxation practices could incite retaliatory measures from other states, leading to an unhealthy competition among them rather than fostering cooperation for mutual benefit. They also expressed concern about potential violations of due process rights if states were allowed to levy taxes arbitrarily without any clear guidelines or standards.