The problem discussed in this article may best be understood by outlining an illustrative hypothetical case, as follows: A, a resident of the state of X, is an employee of the federal government, from which he receives an annual salary of $3000. He also receives an equal amount from personal investments, so that his total annual income is $6ooo. The state of X imposes an income tax, but allows a personal exemption of $3000. It is provided, of course, that income from the federal government (including interest on its securities) is exempt from taxation, but it is also provided that the personal exemption is to be reduced to the extent of all such non-taxable income received by the taxpayer. The result is that A receives no personal exemption, and is obliged to pay a tax on the basis of $3000. He thus obtains no benefit by reason of the fact that part of his income is derived from the federal government and is not taxable by X; and he pays the same tax as his neighbor, B, who has a $6ooo income no part of which is derived from the federal government or its agencies. On the other hand, the federal income is itself not directly taxed. The problem presented is whether this provision of the state tax law, reducing the personal exemption by reason of the receipt of income itself non-taxable because derived from the federal government, is unconstitutional because imposing an indirect burden upon the federal functions. In other words, the question comes down to whether it is sufficient for the states to refrain from discriminating against a taxpayer who receives income from the federal government or whether he must be treated better than others who do not receive such income. Of course, the same question will arise if deductions for computing taxable income rather than personal exemptions are reduced by the receipt of non-taxable income, since the result is the same. Also the question mav arise where the federal tax laws provide for the reduction of statutory personal exemptions or deductions by the amount of income received from the states and therefore non-taxable by the United States. If the hypothetical case stated at the beginning involves an unconstitutional burden upon the federal government by the state, the present assumed situation is likewise an