New York imposed a tax on the salary paid to a federal worker who resided in that state. The worker paid the tax and appealed, arguing intergovernmental immunity. The Supreme Court, by a 7-2 vote, overruled Collector v. Day[case]Collector v. Day[Collector v. Day] (1871) and established the right of the federal government to collect taxes on the salaries paid to state employees. Until Graves, state employees had been immune from federal taxes and federal employees immune from state taxes. This mutual tax immunity was reinforced by the Court in Pollock v. Farmers’ Loan and Trust Co.[case]Pollock v. Farmers’ Loan and Trust Co.[Pollock v. Farmers’ Loan and Trust Co.] (1895). However, in his opinion for the Court, Justice Harlan Fiske StoneStone, Harlan Fiske;Graves v. New York ex rel. O’Keefe[Graves v. New York ex rel. O’Keefe] rejected the idea that a tax on income is equivalent to a tax on the income’s source. The Public Salary Tax Act of 1939 specifically allowed the states to tax the salaries of federal employees and permitted the federal government to tax the incomes of state employees.Salaries;state employeesTax immunities;Graves v. New York ex rel. O’Keefe[Graves v. New York ex rel. O’Keefe]Salaries;state employees

Collector v. Day

Due process, procedural

Federalism

Fourteenth Amendment

Pollock v. Farmers’ Loan and Trust Co.

Tax immunities