McCulloch v. Maryland

Whether Congress could create a national bank had divided the founders. In 1791 Alexander Hamilton argued that it could, as a means of carrying out its powers to tax and borrow; Jefferson and Madison argued the Constitution gave no such power. The First Bank’s charter lapsed in 1811. After the War of 1812 exposed the chaos of unregulated state banknotes, Congress chartered the Second Bank of the United States in 1816. Many states resented it, and in 1818 Maryland imposed a tax on all banks not chartered by the state — aimed squarely at the national bank’s Baltimore branch. Its cashier, James McCulloch, refused to pay, and Maryland sued.

• Does the Constitution give Congress the power to create a bank?
• If so, may a state tax that bank?

Beneath both lay a larger question: is the federal government sovereign over the states within its sphere of authority?

The Court unanimously held that Congress had the power to incorporate the bank, and that Maryland could not tax instruments of the national government used to carry out its constitutional powers. Maryland’s tax was unconstitutional.

Marshall acknowledged that the Constitution nowhere mentions a bank. But, he reasoned, a constitution cannot list every means by which government may act: “we must never forget that it is a constitution we are expounding.” The necessary and proper clause lets Congress choose any appropriate means to carry out its enumerated powers — to tax, borrow, and regulate commerce. “Necessary,” he wrote, does not mean absolutely indispensable but useful or conducive: “Let the end be legitimate, let it be within the scope of the constitution, and all means which are appropriate, which are plainly adapted to that end, which are not prohibited… are constitutional.”

On the tax, Marshall relied on the supremacy clause. The states kept their power to tax, but the Constitution and federal laws are supreme and cannot be controlled by the states. Since “the power to tax involves the power to destroy,” allowing a state to tax a federal institution would let one part of the nation undermine laws made by the whole.

The decision secured the Second Bank until President Andrew Jackson vetoed its recharter in 1832 — arguing, in direct defiance of Marshall, that each branch must judge constitutionality for itself. More broadly, McCulloch gave Congress wide latitude to choose how to exercise its powers and confirmed that states could not interfere with legitimate federal operations.

McCulloch is regarded as one of the most important decisions in American constitutional history. Its broad reading of implied powers underpins much of modern federal law, from the regulation of the economy during the New Deal to civil rights legislation. States’-rights critics, from 1819 onward, argued that it gave the federal government nearly unlimited power. The balance between national authority and states’ rights it addressed has remained contested ever since.