Page:James Dawson, et ux. v. Dale W. Steager, West Virginia State Tax Commissioner.pdf/4

2 of the pay or compensation.” §111(a).

Section 111 codifies a legal doctrine almost as old as the Nation. In McCulloch v. Maryland, 4 Wheat. 316 (1819), this Court invoked the Constitution’s Supremacy Clause to invalidate Maryland’s effort to levy a tax on the Bank of the United States. Chief Justice Marshall explained that “the power to tax involves the power to destroy,” and he reasoned that if States could tax the Bank they could “defeat” the federal legislative policy establishing it. Id., at 431–432. For the next few decades, this Court interpreted McCulloch “to bar most taxation by one sovereign of the employees of another.” Davis v. Michigan Dept. of Treasury, 489 U. S. 803, 810 (1989). In time, though, the Court softened its stance and upheld neutral income taxes–those that treated federal and state employees with an even hand. See Helvering v. Gerhardt, 304 U. S. 405 (1938); Graves v. ''New York ex rel. O’Keefe'', 306 U. S. 466 (1939). So eventually the intergovernmental tax immunity doctrine came to be understood to bar only discriminatory taxes. It was this understanding that Congress “consciously… drew upon” when adopting §111 in 1939. Davis, 489 U. S., at 813.

It is this understanding, too, that has animated our application of §111. Since the statute’s adoption, we have upheld an Alabama income tax that did not discriminate on the basis of the source of the employees’ compensation. Jefferson County v. Acker, 527 U. S. 423 (1999). But we have invalidated a Michigan tax that discriminated “in favor of retired state employees and against retired federal employees.” Davis, 489 U. S., at 814. We have struck down a Kansas law that taxed the retirement benefits of federal military personnel at a higher rate than state and local government retirement benefits. Barker v. Kansas, 503 U. S. 594, 599 (1992). And we have rejected a Texas scheme that imposed a property tax on a private company operating on land leased from the federal government, but