The United States Supreme Court case, United States v. Terry J. Hatter Jr., et al., in 2000 revolved around the issue of whether federal judges' salaries could be taxed under certain laws passed after their appointment to the bench. The Constitution's Compensation Clause prohibits reducing a judge's pay while they are in office, and Judge Hatter argued that imposing new taxes effectively did this. Initially, lower courts ruled against him but on appeal to the Supreme Court, it was held by unanimous decision that applying Medicare and Social Security taxes to federal judges appointed before these laws were enacted violated the Compensation Clause as it resulted in diminished net compensation for those serving life terms under good behavior conditions (essentially all Article III Judges). Therefore, such taxation was deemed unconstitutional.

In the dissenting opinion for United States v. Terry J. Hatter, Jr., Justice Scalia argued that Congress did not violate the Compensation Clause when it subjected federal judges' salaries to a Medicare tax and increased their Social Security taxes. He contended that these were general public laws applicable to all citizens and thus did not specifically target judges or diminish their compensation in violation of Article III of the Constitution. Scalia also pointed out that if every change in taxation affecting judicial salaries constituted a diminishment, then any new tax law could potentially be seen as unconstitutional which would create an impractical precedent. Furthermore, he noted that historically there had been numerous changes in taxation without corresponding adjustments to judicial pay suggesting this was consistent with past practice and understanding of the clause's meaning.