Show BackgroundIn 1816, Congress chartered The Second Bank of the United States. The bank, controlled by private stockholders, held federal funds. The bank also could issue notes; in exchange, the bank would loan the federal government money, rather than paying taxes. This privilege annoyed other state banks. With the 1818 depression, tensions grew. In Maryland, a steep tax was imposed on banks that were "not chartered within the state." When The Second Bank of the United States refused to pay the tax, the State of Maryland sued their cashier to collect the tax.[2] Stakeholders
Rulings
Supreme CourtDecision: The Court reversed the lower court's decision in a 7-0 vote, determining that Congress had the ability to establish a bank, and that Maryland could not impose taxes on the federal bank. According to Marshall, who authored the decision, "the constitution and the laws made in pursuance thereof are supreme...they control the constitution and laws of the respective states, and cannot be controlled by them."[1] Lastly, the court ruled that by taxing the bank, Maryland was violating constitutional sovereignty by levying a tax against the United States, when, as a state, it only had the power to tax its own citizens.[2] Maryland Court of AppealsDecision: The Appeals Court affirmed the lower court's decision.[2] Maryland State CourtDecision: The Court ruled in favor of Maryland's right to impose a tax on the United States bank. ReactionStates' rights advocates were unhappy with Marshall's decision. A series of angered newspaper responses followed from Judge Spencer Roane, Judge William Brockenbrough and former U.S. Senator John Taylor. Marshall did not let the articles go unanswered, however. He responded under the nom de plume "A Friend of the Union," in Philadelphia. Because the paper did not print his responses in their entirety, he republished them in Virginia under the name "A Friend of the Constitution." Later, in 1832, Andrew Jackson dismantled the bank. Despite this action, the Supreme Court's interpretation of the Constitution was upheld.[3] LegacyThis decision extended Congress' authority by recognizing implied powers as a result of the Necessary and Proper Clause of Article I, Section 8 of the Constitution.[2]
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McCulloch v. Maryland was the first, and probably the most important, Supreme Court decision addressing federal power. In this case, the justices held that the federal government has implied or "unenumerated" powers under Article I, Section 8 of the United States Constitution. That section is now known as the "necessary and proper" clause. The Supreme Court established that congressional power extends beyond the scope of the Constitution and that state governments cannot interfere with the federal government. In doing so, the justices defined the scope of Congressional power and clarified the relationship between state and federal government. It all started when Alexander Hamilton convinced Congress to establish a national bank. BackgroundShortly after George Washington was inaugurated as the nation's first president in 1789, his Treasury Secretary, Alexander Hamilton, proposed a plan to create a national bank. The idea was controversial from the start. Thomas Jefferson, who was Secretary of State at the time, feared having a central bank to regulate American currency would take too much power away from the states. (Fans of the hit musical Hamilton might recognize this as the conflict from "Cabinet Battle #1.") And the 1787 Constitutional Convention deliberately decided that the Constitution should not give Congress the power to create corporations. But, Congress opted to try out Hamilton's idea, creating the First Bank of the United States with a 20-year charter. Then, they let the charter lapse in 1811. However, the nation faced significant economic problems after the War of 1812, which prompted Congress to create the Second Bank of the United States in 1816. Some states passed laws to try and undermine the national bank's operations. Others, like Maryland, decided to tax it. In 1818, Maryland's state legislature passed a $15,000 annual tax on any bank operating within the state that was not charted by the state government. Only one institution fit that description - The Second Bank of the United States. James W. McCulloch, the head of the bank's Baltimore branch, refused to pay the tax. The state of Maryland argued that because the Constitution was "silent on the subject of banks," the federal government was not authorized to create one. But when the case reached the U.S. Supreme Court in 1819, the court disagreed. What Are Enumerated Powers? What Are Implied Powers?In constitutional law, we talk about government power in terms of what is specifically outlined in the Constitution and what isn't. The things the Constitution outlines for Congress to do are "enumerated" powers. Enumerated powers are also sometimes called expressed powers or explicit powers. Most of them are covered in Article I, Section 8 of the Constitution. The federal government's enumerated powers include:
But Congress has the power to do many other things, thanks to the part of the Constitution which states it can make all laws "necessary and proper" to carry out its enumerated powers. These are known as the legislature's "unenumerated" or "implied" powers. In the years that followed McCulloch, Congress used the "necessary and proper" argument to pass laws in many different areas. Later Supreme Court cases concluded that Congress's implied powers include:
Some argue this goes against the Constitution's 10th Amendment, which states that "powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people." How the Supreme Court Decided McCulloch v. MarylandIn deciding McCulloch v. Maryland, the Supreme Court had two questions to answer: 1. Did Congress have the power to establish a national bank? 2. Did Maryland's law taxing the bank unconstitutionally interfere with Congress's power? Renowned attorney and orator Daniel Webster, who would later serve as Secretary of State, argued on behalf of the national bank. Writing the court's unanimous decision, Chief Justice John Marshall stated that the Constitution grants Congress the power to make "all laws necessary and proper" for carrying out the capabilities outlined in Article I, Section 8. A supporter of national government power, Chief Justice Marshall defined "necessary" to mean anything "appropriate and legitimate." This gave Congress broad authority to carry out its constitutional duties, so long as its actions were logically tied to one of its enumerated constitutional powers. Although the Constitution said nothing about the federal government establishing a bank, the court held that doing so would help Congress carry out its other duties - such as collecting taxes and maintaining armed forces. Furthermore, Marshall concluded, Article VI establishes the Constitution as the "supreme Law of the Land." Therefore, states have no power to interfere with federal law, and Maryland's tax on the national bank was unconstitutional. They reasoned that if states can tax one facet of the federal government, they can tax them all, defeating the purpose of having a federal government at all. In a now-famous portion of the decision, Justice Marshall wrote, "the power to tax is the power to destroy." The Impact of McCulloch v. MarylandThe decision in McCulloch had a profound effect on cases involving state vs. federal power. The doctrine of implied powers created by the court became a powerful tool for the federal government. The case established, once and for all, that when state and federal laws are in conflict, the federal law always wins. McCulloch also paved the way for what some call the "administrative state," a form of government that employs an extensive professional class to oversee government, the economy, and society. Essentially, the federal regulators who oversee many aspects of American life, including environmental agencies and labor regulators. Without the McCulloch decision, some of these agencies might not exist. Whether the administrative state is a good thing or not is generally a matter of political opinion. Still, there's no doubt that debate would look very different if the Supreme Court had come to a different conclusion in McCulloch. Read the Supreme Court's full opinion in McCulloch v. Maryland on FindLaw's Cases & Codes. |
An important result of mcculloch v. maryland (1819) was to
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