In the 1923 case of New York State Railways v. Shuler, the U.S Supreme Court was tasked with determining whether a tax imposed by the state of New York on public utility corporations violated constitutional principles. The tax in question required these corporations to pay an annual franchise fee based on their gross earnings within the state. The plaintiff, New York State Railways, argued that this law constituted a violation of both due process and equal protection clauses under Fourteenth Amendment as it unfairly targeted certain businesses for taxation while exempting others. The court ruled against New York State Railways, upholding the constitutionality of the tax law. It found no violation of either due process or equal protection rights because states have broad powers to levy taxes as they see fit so long as there is some reasonable basis for classification among taxpayers and no clear proof exists that such classifications are arbitrary or discriminatory. This decision affirmed states' authority over local matters like taxation policy and underscored courts' deference to legislative judgment in economic regulation unless it clearly violates constitutional protections.

In the dissenting opinion for New York State Railways v. Shuler, Justice McReynolds argued that the majority's decision was a departure from established principles of law and an unwarranted intrusion into state affairs. He contended that it was not within the purview of federal courts to interfere with or question a state's management of its internal matters unless there is clear violation or abuse. In this case, he believed that New York had acted within its rights in imposing taxes on railway companies operating within its borders and saw no reason why such action should be deemed unconstitutional. Furthermore, he expressed concern over potential implications of this ruling on states' abilities to govern themselves without undue interference from federal authorities.