How did the Supreme Court assert federal power over the states in McCulloch v Maryland?

Today, it seems that having a central bank is a necessity for almost all nations, industrialized and developing alike. While the existence of the Federal Reserve may now be taken for granted, an investigation into the history of national banks in the United States reveals a legacy of intense debate and political struggle.

Perhaps the seminal episode in this saga was McCulloch v. Maryland, a case decided on March 6, 1819, dealing with the Second Bank of the United States, constitutional restraints on federal power, and the nature of American federalism.

The First Bank of the United States, an effort spearheaded by Alexander Hamilton, was established in 1791 as a way for the federal government to deal with Revolutionary War debt and stabilize currency. After its charter expired in 1811, Congress failed to reauthorize the bank, but a renewed interest in a national bank emerged after the War of 1812. As an effort to again manage war debt and rising inflation, President James Madison signed a bill in 1816 creating the Second Bank of the United States.

Jeffersonian Republicans fervently opposed the bank’s formation, asserting both that it exceeded the powers of the federal government as outlined in , and that it would create, favor, and maintain a powerful, wealthy upper class.

In an action understood by many to be a direct repudiation of the national bank, the state of Maryland passed a law in 1816 imposing a tax on all banks and branches not chartered by the state legislature. At the time, the Second Bank of the United States was the only bank operating in Maryland that fit the description and thus was subject to the tax.

James McCulloch, the head of the Baltimore branch of the national bank, refused to pay the tax. His defiance prompted a lawsuit that brought into question both the Maryland law and the authority of the federal government to establish the bank in the first place.

In a unanimous decision authored by Chief Justice John Marshall, the Supreme Court struck down the Maryland statute and affirmed Congress’ authority to establish a national bank. Opponents had pointed to of the Constitution, which explicitly enumerates the powers of Congress, and had argued that it did not include the power to charter a national bank.

Adopting a more lenient reading of the , the Court explained that Congress has the power to enact legislation that aids the federal government in pursuing appropriate and legitimate ends. Even if a power is not explicitly granted to Congress under Article 1, Section 8, Congress nevertheless has authority to use other, non-enumerated means to pursue reasonable ends.

Chief Justice Marshall reasoned that one objective of the Constitution was to promote commercial development and prosperity throughout the United States, and that, since the establishment of a national bank was an appropriate means of achieving that end, Congress has the power to charter a bank. Unless a means to achieving legitimate ends is expressly prohibited in the Constitution, the questions involving issues like a national bank are "question[s] of legislative discretion, not of judicial cognizance."

After determining that Congress has the authority to charter a national bank, Marshall explained that the Maryland statute was illegitimate. Looking to the Supremacy Clause and the nature of our federalist system, Marshall wrote that “the States have no power, by taxation or otherwise, to retard, impede or in any manner control the operations of” enactments of Congress. Famously declaring that “the power to tax is the power to destroy,” Marshall struck down the Maryland law as an illegitimate state impediment to legitimate federal operations.

As one of the first decisions that legitimized a broader understanding of federal powers and underscored the supremacy of the federal government, the lasting influence of McCulloch v. Maryland cannot be overstated.

Many of Congress’ most consequential actions, including regulations, safety-net programs, and civil rights protections, are not explicitly enumerated in Article 1, Section 8, and have been justified using the reasonableness standard established in McCulloch. And while the powers of states in relation to the federal government have waxed and waned over time, McCulloch established baseline constraints on how states can and cannot react to federal legislation and programs.

Jonathan Stahl is an intern at the National Constitution Center. He is also a senior at the University of Pennsylvania, majoring in politics, philosophy and economics.

McCulloch v. Maryland is one of the most important Supreme Court cases in US history. It helped shape what the United States government looks like today by reaffirming the supremacy clause of the Constitution. It also set a precedent in how balancing power between the federal government and states.

How did the Supreme Court assert federal power over the states in McCulloch v Maryland?
Figure 1. United States Supreme CourtAuthor, Beyond my Ken, CC-BY-SA Wikimedia Commons

McCulloch v. Maryland Summary

The case has its origins in 1789 when the creation of a national bank was first proposed. This proposal sparked a Federalist vs. Anti-Federalist debate in Congress. The federalists won the debate, and the First Bank of the United States was chartered. However, after 20 years, Congress declined to renew its charter due to the same anti-federalist sentiment from years past.

Following the War of 1812, the discussion of creating a federal bank surfaced again and in 1816 Congress voted to create the Second Bank of the United States. Its charter angered many states because of its broader powers and influence than the First Bank of the United States. Maryland was particularly upset when a Second Bank of the United States branch opened up in Baltimore. The state created a law directly aimed at the federal bank; it would charge a $15,000 tax to any bank not charted by the state and the only bank not charted by the state in Maryland was the Second Bank of the United States.

Maryland attempted to collect its tax; however, James McColluch, a bank cashier, declined to pay it, calling the tax unconstitutional. Maryland sued McColluch and argued that Congress chartering a federal bank was unconstitutional and that as a state entity, it could collect from any business that conducted business within the state.

This case made its way to the Supreme Court in 1819. The Court unanimously sided with McCulloch. Chief Justice John Marshall authored the Court’s opinion. He explained that the chartering of a federal bank by Congress was constitutional because it was a power implied by its enumerated powers in the Constitution, citing the Necessary and Proper Clause in Article 1 of the Constitution. The Court also ruled that the Maryland tax was unconstitutional because, as a state entity, its actions cannot interfere with the federal government’s powers, citing the Supremacy Clause in Article 6 of the Constitution.

Enumerated Powers: Powers granted to the branches of the United States government that are specifically mentioned in the Constitution.

Implied Powers: Any powers granted to the branches of the United States government that are not explicitly mentioned in the Constitution, but are inferred in the enumerated powers.

The decision made by the Supreme Court helped broaden federal powers while establishing the supremacy of the federal government over the states.

McCulloch v. Maryland Background

Alexander Hamilton, the first Secretary of Treasury and an avid proponent of Federalism led an effort for Congress to create a federal bank. He argued that a federal bank would stabilize the economy, issue money, hold public funds, collect tax revenues, and pay government debts. Critics with strong Anti-federalist views, including prominent figures Thomas Jefferson and James Madison, argued that the bank would create a monopoly and undermine state banks and that the Constitution did not give Congress the authority to charter federal banks. Once put to the vote, Hamilton prevailed, and in 1791, President George Washington signed a bill creating the first federal bank: The First Bank of the United States.

How did the Supreme Court assert federal power over the states in McCulloch v Maryland?
Figure 2. First Bank of the United States in Philadelphia in 1800, W. Birch & Son, CC-PD-Mark, Wikimedia Commons

Creation of First Bank of the United States.

The First Bank of the United States opened in Philadelphia before opening multiple locations around the United States. It was a public-private institution with the federal government owning 2 million in shares and private investors owning 8 million. Many still argued against its creation, and when it was up for renewal in 1811, Congress, under the Presidency of James Madison, decided not to renew it by one vote.

Creation of the Second Bank of the United States

Following the War of 1812, the United States government was heavily indebted; John Jacob Astor, a private sector magnate, and Representative John C. Calhoun led a movement to create a second federal bank. After years of debate, in 1816, Congress, under the same James Madison Presidency, voted in favor of establishing the Second Bank of the United States. As with the First Bank of the United States before it, the Second Bank of the United States opened in Philadelphia and went on to establish an additional 26 branches around the country. It provided ample credit to farmers and businesses and financed the shipping of goods in domestic and foreign markets. Due to its extensive presence and influence, the federal bank was able to control interest rates given by banks nationwide.

Many states were angered by this federal influence and resented the Second Bank of America’s overreach. Maryland, in 1818, run by the Democratic-Republican Party, passed a law that would impose a $15,000 tax on any bank not chartered by the state. This law was meant to take aim at the federal bank since it was the only bank not chartered by the state.

McCulloch and the Maryland Tax

Maryland moved forward to collect its tax from the Second Bank of the United States. However, there was an issue at the Baltimore Branch. The bank’s administrator, James McCulloch, refused to pay the tax and argued that the tax was unconstitutional. Maryland sued McCulloch, proclaiming that as a state entity, it could tax anyone doing business within the state and that Congress did not have the power to create a national bank. The state court voted in favor of Maryland, as did the Court of appeals. McColloch, represented by Daniel Webster, appealed his case to the Supreme Court. In 1819 the Supreme Court Heard his case.

How did the Supreme Court assert federal power over the states in McCulloch v Maryland?
Figure 3. Chief Justice Marshall - McCulloch v. Maryland 1819, Swatjester, CC-BY-SA-2.0, Wikimedia Commons

McCulloch v. Maryland Decision

In a unanimous decision by the Supreme Court, the Court ruled in favor of McCulloch. In the opinion written by Chief Justice Marshall, using many of Daniel Webster’s arguments, he states that the Second Bank of the United States was constitutional and that the Maryland tax was unconstitutional.

Regarding the constitutionality of a federal bank, Chief Justice Marshall refers to the Necessary and Proper Clause of, Article 1, Section 8 of the Constitution. This clause allows the federal government to create and pass laws that are not specifically provided by the Constitution so long as those laws are "necessary and proper" to exercise the powers authorized to Congress in the enumerated powers of the Constitution. Because the enumerated powers allowed for regulating commerce, paying debts, and borrowing money, Marshall determined that the establishment of a federal bank was an implied power, that is, one which is not specifically listed but aids in the facilitation of exercising enumerated powers.

Regarding Maryland’s tax, the Chief Justice referred to the Supremacy Clause in Article 6 of the Constitution, which states that federal laws trump state laws. He argued that if a state could tax one federal entity, what would stop states from taxing any other federal entities. Maryland was threatening the superior laws of the United States and the Supreme Court decided that states had no right to interfere in federal law, making Maryland’s tax unconstitutional. But it didn’t stop there. The Court argued that the Maryland tax infringed on constitutional sovereignty because it levied a tax against all people in the United States when the state is only accountable for a portion of that population.

McCulloch v. Maryland Application towards the States

The McCulloch v. Maryland decision solidified the rule that federal laws trumped state laws. From this point on, states could not interfere in federal matters when the federal government used its implied powers to facilitate its constitutionally enumerated powers.

McCulloch v. Maryland Significance

The Court’s unanimous decision in McCulloch v. Maryland profoundly impacted the United States Government and played a significant role in defining what Federalism would look like in the United States. The decision broadened the powers of Congress by setting the precedent that Congress is within its rights to pass any law, as long as it aids its duties enumerated in the Constitution. It also firmly established that federal laws always supersede state laws and that states didn’t have the ability to interfere in federal laws, as demonstrated by the Supremacy Clause in the Constitution.

The implied powers of Congress have paved the way for income tax laws, immigration laws, gun laws, and draft laws, to name a few. Many critics, even today, argue that this case expanded the federal government’s powers to an unmeasurable level; implied powers can evolve and change over time, giving the federal government unconstrained power. These same critics also argue that the United States has slowly become an administrative state, tracing part of this problem back to the decision made in McCulloch v. Maryland.

Administrative state: A state where the Executive Branch of government is able to create, judge, and enforce its own rules.

What did the Supreme Court say in McCulloch v. Maryland about Congress power?

In a unanimous decision, the Court held that Congress had the power to incorporate the bank and that Maryland could not tax instruments of the national government employed in the execution of constitutional powers.

Did McCulloch vs Maryland increase federal power?

First, the federal government has powers that are not listed in the Constitution. The decision in McCulloch v. Maryland enhanced federal power and gave the federal government ways to achieve the responsibilities that were given to it in the Constitution.

How did the 1819 Supreme Court decision in McCulloch v. Maryland increase the power of Congress?

Maryland that Congress had the authority to establish a federal bank, and that the financial institution could not be taxed by the states. But the decision carried a much larger significance, because it helped establish that the Constitution gave Congress powers that weren't explicitly spelled out in the document.

How did the decision in McCulloch v. Maryland increase federal power quizlet?

The decision in McCulloch v Maryland, (1819) increased federalism by invoking "implied powers" and established a hierarchical dominance of the federal government over the states.