McCulloch v. Maryland



In 1818 Maryland’s legislature passed and enacted a law that taxed all banks in the state of Maryland not established by the state itself.  It required all of these banks to issue bank notes on a particular form of paper and stamp that was issued by the state of Maryland.  The state set a fee for the paper and issued penalties for disobedience.

Two years prior, Congress established a separate bank of the United States in Maryland.  This non-state-established bank issued notes on its own accord.  Maryland’s bank regulation of non-state established banks was a direct response to the establishment of the relevant United States Bank.  The United States Bank refused to pay the tax and issue notes in accordance with Maryland’s passed enactment.

The Maryland Court of Appeals held that the constitution was silent on the specific issue of the charter of federal banks and therefore there was no constitutional authority granted for the establishment of federal banks.

The Issue

Whether Congress has the authority to create a bank where the Constitution does not specifically authorize its power to do so.

Whether a state entity may tax a federal entity.

The Holding

Yes, Congress can establish a federal bank where the Constitution does not specifically authorize it to do so.  A federal bank had already been established at the time.  The states are not ultimately sovereign because it is the states who ratified the constitution and therefore authorized the bank themselves.  A specific mentioning of a particular power is not necessary to establish such a power, as in the case with a federal bank.  The court then invoked the necessary and proper clause – that Congress may establish law that relates to the objectives sought by their enumerated power insofar as it is “rationally related” to the objective and is not specifically forbidden by the Constitution.  Because the necessary and proper clause is listed in the section with Congress’s enumerated powers – not within its limitations – it should not be interpreted as to mean that Congress may pass laws only strictly necessary to the law’s execution.  Therefore, Congressional power extends to the enactment of all legitimately established objectives of the Constitution:  “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, but consist with the letter and spirit of the constitution, are constitutional.”  Moreover, if the authors of the Constitution had wanted to exclude “incidental” powers they would have required specific interpretation.

No.  Because the establishment of the bank is a legitimate Congressional function and the Constitution is the supreme law of the land, a state government may not tax a federal entity.  Taxation of the entity would impede the legitimate function of the federal goal.  The state could tax any federal entity into oblivion, thereby eliminating the impact of Congressional action.  One limitation on this doctrine is that the state may tax the property on which the federal establishment lays.

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