 Reproduction courtesy of the Library of Congress Show In McCulloch v. Maryland (1819) the Supreme Court ruled that Congress had implied powers under the Necessary and Proper Clause of Article I, Section 8 of the Constitution to create the Second Bank of the United States and that the state of Maryland lacked the power to tax the Bank. Arguably Chief Justice John Marshall's finest opinion, McCulloch not only gave Congress broad discretionary power to implement the enumerated powers, but also repudiated, in ringing language, the radical states' rights arguments presented by counsel for Maryland. At issue in the case was the constitutionality of the act of Congress chartering the Second Bank of the United States (BUS) in 1816. Although the Bank was controlled by private stockholders, it was the depository of federal funds. In addition, it had the authority to issue notes that, along with the notes of states' banks, circulated as legal tender. In return for its privileged position, the Bank agreed to loan the federal government money in lieu of taxes. State banks looked on the BUS as a competitor and resented its privileged position. When state banks began to fail in the depression of 1818, they blamed their troubles on the Bank. One such state was Maryland, which imposed a hefty tax on "any bank not chartered within the state." The Bank of the United States was the only bank not chartered within the state. When the Bank's Baltimore branch refused to pay the tax, Maryland sued James McCulloch, cashier of the branch, for collection of the debt. McCulloch responded that the tax was unconstitutional. A state court ruled for Maryland, and the court of appeals affirmed. McCulloch appealed to the U.S. Supreme Court, which reviewed the case in 1819. In a unanimous opinion written by Chief Justice Marshall, the Court ruled that the Bank of the United States was constitutional and that the Maryland tax was unconstitutional. Concerning the power of Congress to charter a bank, the Court turned to the Necessary and Proper Clause of Article I, Section 8, which expressly grants Congress the power to pass laws "necessary and proper" for the execution of its "enumerated powers." The enumerated powers of Congress include the power to regulate interstate commerce, collect taxes, and borrow money. Said the Court famously, "let the ends be legitimate, let it be within the scope of the constitution, and all means which are appropriate, which are plainly adopted to that end, which are not prohibited, but consist with the letter and spirit of the constitution, are constitutional." In other words, because the creation of the Bank was appropriately related to Congress's legitimate power to tax, borrow, and regulate interstate commerce, the Bank was constitutional under the Necessary and Proper Clause. Second, the Court ruled that Maryland lacked the power to tax the Bank because, pursuant to the Supremacy Clause of Article VI of the Constitution, the laws of the United States trump conflicting state laws. As Marshall put it, "the government of the Union, though limited in its powers, is supreme within its sphere of action, and its laws, when made in pursuance of the constitution, form the supreme law of the land." Because "the power to tax is the power to destroy," Maryland was unconstitutionally undermining the superior laws and institutions of the United States. Finally, the Court held that the "sovereignty" (political authority) of the Union lies with the people of the United States, not with the individual states that comprise it. The United States, not a simple alliance of states, is a nation of "constitutional sovereignty" with its authority resting exclusively with "the people" who created and are governed by the Constitution. To the Court, "the government of the Union is a government of the people; it emanates from them; its powers are granted by them; and are to be exercised directly on them, and for their benefit." Maryland's tax, however, violated constitutional sovereignty because it acted as a levy against all the people in the United States by a state accountable to only some of the people.If Marbury v. Madison (1803) "promised" that the Supreme Court would exercise great authority in shaping the laws of the land, McCulloch v. Maryland fulfilled that promise for the first time. Arguably no other decision has so profoundly defined national power. In one case, the Court expanded Congress' powers to include those implied by the Constitution, established the inferior status of the states in relation to the Union, and set the constitutional sovereignty of the federal government. McCulloch remains today a fundamental and binding bedrock of American constitutional law.
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. |
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