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In 1864, Congress created a tax on incomes over $1,000. The Congress maintained the tax for the next three years. J.M. Day, a state judge in Massachusetts, protested the tax and filed suit against the revenue service.

Did Congress have the power to impose taxes on the states and state officials?

In an 8-to-1 decision, the Court held that the taxing power of the national government could not be used to interfere with the essential workings of state governments. The Court reasoned that the states and the "general government" were two distinct entities, and that the states' right to establish judicial departments could not be infringed. The national government could not tax the "means and instrumentalities" of state self-preservation.