McCulloch v. Maryland
4 Wheat. 316 (1819)
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Rule of Law:
Under the Necessary and Proper Clause, Congress has the implied power to create a national bank to carry out its enumerated powers. Pursuant to the Supremacy Clause, states are prohibited from taxing or otherwise interfering with the legitimate operations of federal institutions.
Facts:
- In 1791, the First Bank of the United States was chartered, but its charter expired in 1811.
- In 1816, facing economic difficulties after the War of 1812, the U.S. Congress chartered the Second Bank of the United States.
- The Second Bank of the United States established a branch in the city of Baltimore, Maryland.
- In 1818, the Maryland General Assembly passed a law imposing a tax on all banks operating in Maryland that were not chartered by the state.
- The Maryland law required the affected bank to either pay an annual tax of $15,000 or purchase stamped paper for its bank notes, effectively taxing its operations.
- James W. McCulloch, the cashier of the Baltimore branch of the Bank of the United States, issued bank notes without complying with the Maryland tax law.
Procedural Posture:
- The State of Maryland brought an action against James W. McCulloch in the Baltimore County Court for violating the state tax law.
- The Baltimore County Court, a state trial court, rendered judgment against McCulloch.
- McCulloch, the appellant, appealed the trial court's decision to the Maryland Court of Appeals, the state's highest court.
- The Maryland Court of Appeals affirmed the judgment against McCulloch.
- McCulloch then appealed the decision of the Maryland Court of Appeals to the Supreme Court of the United States on a writ of error.
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Issue:
Does Congress have the constitutional power to incorporate a bank, and if so, may a state tax that federally-created bank?
Opinions:
Majority - Chief Justice Marshall
Yes, Congress has the power to incorporate a bank, and No, a state may not tax it. The Constitution grants Congress implied powers to implement its enumerated powers in order to create a functional national government, and state laws cannot interfere with the valid exercise of federal power. First, the power to create a bank is an implied power derived from the Necessary and Proper Clause (Art. I, § 8, Cl. 18). While the government is one of enumerated powers, the Constitution cannot detail every means for executing those powers. The term "necessary" in the clause does not mean absolutely indispensable but rather convenient or useful. As long as the end is legitimate and within the scope of the Constitution, all means which are appropriate and plainly adapted to that end are constitutional. Second, the Maryland tax is unconstitutional under the Supremacy Clause (Art. VI, Cl. 2). The Constitution and the laws made in pursuance thereof are the supreme law of the land. Since "the power to tax involves the power to destroy," allowing a state to tax a federal institution would grant it the power to destroy or control that institution, making the federal government subordinate to the states, which is contrary to the constitutional design.
Analysis:
McCulloch v. Maryland is a landmark decision that profoundly shaped American federalism by establishing two critical principles. First, it affirmed the doctrine of implied powers, giving a broad interpretation to the Necessary and Proper Clause that allows Congress significant flexibility to achieve its constitutionally enumerated goals. Second, it solidified the supremacy of the federal government over the states, establishing that states cannot tax, impede, or otherwise control valid federal operations. This ruling provided the constitutional foundation for the expansion of federal authority in the centuries that followed.
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