In McCulloch v. Maryland, the Supreme Court ruled that the Constitution gave Congress the right to create a national bank exempt from all state taxes. The 1819 decision was one of the oldest and most important decisions of the Court regarding the division of powers between the national government and the state governments of the United States.
Conflict over a national bank
As the 13 former British colonies came together to form one country in the years following the War of Independence, federalists like Alexander Hamilton argued that the new nation needed a strong central government. Anti-Federalists like Thomas Jefferson disagreed and believed that the Constitution ratified in 1789 took too much power from individual states. The Bill of Rights was intended to limit the powers of the federal government to those expressly set out in the Constitution and to reserve all other powers to the states.
As the first Secretary of the United States Treasury, Hamilton established the first Bank of the United States in 1791 to provide the country with a stable monetary system. As a concession to anti-federalists, the Bank has only been approved for 20 years. Although President James Madison (a prominent anti-Federalist who drafted the Bill of Rights) let the charter expire in 1811, financial struggles during the War of 1812 convinced him and others of the need of a national bank.
In 1816, Congress created the second bank in the United States and Madison signed it. Yet many states viewed the Bank as a competitor to their own state banks and did not want it to be within their borders.
Maryland tries to tax America’s second largest bank
Maryland was one of the many states that decided to tax the bank in order to earn money from its operations. In 1818, Maryland imposed an annual tax of $ 15,000 on “any unauthorized bank in the state,” a description that applied only to the second largest bank in the United States. When James McCulloh (later misspelled “McCulloch” by the Clerk of the Court), chief cashier of the bank’s Baltimore branch, refused to pay the tax, Maryland sued him for unpaid taxes.
Famous speaker Daniel Webster and the rest of McCulloh’s legal team argued that the tax was unconstitutional and that Maryland had no right to impose a tax on a federally licensed bank. But the state court ruled in Maryland’s favor and an appeals court upheld the verdict.
The Marshall Court verdict
In a unanimous decision of March 6, 1819, the Supreme Court overturned the verdict of the lower courts and upheld the constitutionality of the second largest bank in the United States. Chief Justice John Marshall drafted the Court’s opinion that the “necessary and proper clause” of Article I, Section 8 of the United States Constitution gave Congress certain implied powers beyond those specifically enumerated in the document – including the creation of a national bank,
As the charter of the second largest bank in the United States was tied to the power of Congress to tax, borrow and regulate interstate commerce, the court ruled that the bank was constitutional on the “necessary and proper” argument. Further, the court said that neither Maryland nor any other state has the right to tax the United States’ Second Bank, a federally chartered institution. States did not have this right because of the “supremacy clause” of Article VI of the Constitution, which stipulated that the laws of the United States (and the Constitution itself) take precedence over the laws adopted by the United States. States.
“The Union government, although limited in its powers, is supreme in its sphere of action,” Marshall wrote. “[I]These laws, when made in accordance with the constitution, form the supreme law of the land. ”
Significance of McCulloch v. Maryland
America’s second-largest bank would last less than 20 more years before state rights champion Andrew Jackson vetoed an attempt by Congress to renew its charter in 1832. But the impact of McCulloch c . Maryland has endured, and the case remains fundamental. part of US constitutional law.
By using the supremacy clause to assert the precedence of federal laws and the Constitution over state laws and state constitutions, Marshall’s decision played a central role in establishing the power structure between the government federal and state government in the United States. Indeed, the McCulloch precedent would be cited in a wide range of legal battles in the centuries to come, including those over Social Security law and other New Deal laws in the 1930s, civil rights law. in 1964 and the Affordable Care Act. in 2012.
The legacy of McCulloch c. Maryland would not have come as a surprise to Marshall himself, who predicted that the debate over this division of power would continue. Such questions, he wrote in his opinion of 1819, “arose constantly and will probably continue to arise, as long as our system exists”.
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The supremacy clause: McCulloch v. Maryland. Annenberg Classroom, Annenberg Center for Public Policy.
McCulloch v. Maryland (1819). History of the Supreme Court: The First 100 Years, Thirteen / WNET New York.
David S. Schwartz, The Spirit of the Constitution: John Marshall and the 200-Year Odyssey of McCulloch V. Maryland. (Oxford University Press, 2019)
