In Shaffer v. Carter, the U.S Supreme Court ruled on a case involving taxation of income earned outside of one's home state. The plaintiff, an Oklahoma resident who had earned income in Mexico and other states, argued that he should not be taxed by Oklahoma for this out-of-state income. He contended that such taxation violated both his Fourteenth Amendment rights to due process and equal protection under the law as well as Article I Section 2 Clause 3 and Article I Section 9 Clause 4 of the Constitution which prohibit direct taxes unless apportioned among states according to population. The court disagreed with Shaffer’s arguments, ruling unanimously that it was constitutional for a state to tax all income of its residents regardless where it is earned. It held that there was no violation because domicile itself establishes sufficient relationship between a person and a state justifying imposition of personal obligations like paying taxes on worldwide earnings.

In the dissenting opinion for Shaffer v. Carter, Justice McReynolds disagreed with the majority's ruling that a state has the right to tax income earned outside of its borders by one of its residents. He argued that this decision violated principles of fairness and equity, as it allowed states to impose taxes on income which they had no role in generating or protecting. Furthermore, he contended that such taxation could lead to double taxation if other states also claimed a right to tax the same income based on their own connections with the taxpayer or his activities. This would place an undue burden on taxpayers and potentially discourage economic activity across state lines.