In the case of State of Texas v. Eastern Texas Railroad Company et al., 1921, the Supreme Court dealt with a dispute over land ownership and taxation between the state of Texas and several railroad companies. The railroads claimed that they were exempt from certain taxes because their lands had been granted to them by Congress as part of an effort to encourage westward expansion in the mid-19th century. However, these lands were originally public domain lands owned by Texas before it joined the Union, which retained its public lands upon annexation unlike other states. Therefore, according to terms agreed upon during annexation, these should have remained free from any federal control or disposal. The Supreme Court ruled in favor of Texas stating that when it became a state in 1845, it did not surrender its title to unappropriated public land within its borders; thus those could not be given away by Congress without consent from Texas itself. This decision upheld sovereignty rights for individual states regarding their own internal improvements and resources.

The dissenting opinion in the case of State of Texas v. Eastern Texas Railroad Company et al., 1921, argued that the majority's decision was a departure from established principles and precedent regarding state taxation rights. The dissenters believed that the court had overstepped its bounds by interfering with a state's right to tax corporations operating within its borders, which they saw as an essential aspect of state sovereignty. They contended that it was not for federal courts to decide whether or not such taxes were fair or reasonable; this should be left up to states themselves. Furthermore, they disagreed with the majority's interpretation of what constituted interstate commerce and felt that their overly broad definition undermined states' ability to regulate businesses within their jurisdiction effectively.