Megan James

McCulloch v. Maryland

17 U.S. 316

FACTS

What we know as the Federal Reserve System did not start out that way. During George Washington’s presidency, secretary of treasury, Alexander Hamilton wanted Congress to adopt an economic plan for the new nation. Proposed was a Bank of the United States. Congress agreed with the proposal, and created a bill authorizing the first federal bank of the United States. When Washington received the bill, the question to whether or not Congress has authority to create such an institution due to the Constitution arose. The bank eventually fell to demise. During the war, the lack of a National Bank for means of borrowing money and transferring funds became looked at as an embarrassment to the Administration. A second bank was then created, and Maryland created a tax they would impose on every bank. This was not approved by legislation, and the defendant, McCulloch wrote notes on unissued, unofficial paper. The State of Maryland sued McCulloch for the penalties he created under the Maryland tax act. The lower court found in favor of Maryland and believed they should be reimbursed for the wrongful taxes imposed.

ISSUES

1. Does the United States Congress have authority under the Constitution to create a National Bank?

2. Was McCulloch wrong in imposing the taxes on the bank?

3. Was the taxation constitutional?

HOLDING

The United States Supreme Court held that Congress does have authority to create a National Bank under the Necessary and Proper Clause found in the Constitution. The Court also held that the tax was unconstitutional and void.

REASONING

The Supreme Court had two major issues to address in this case. The first being whether or not Congress even possesses the correct authority to even create a National Bank. The Court takes a look back to before a centralized bank was created and can see the struggles the country endures due to the lack of a bank. For instance, in the Constitution the word “bank” or “incorporation” does not exist. However, the severe importance in the enumerated powers in

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Megan James

the government to collect taxes, regulate commerce, borrow money, etcetera shows some significance in the need for a centralized bank. Congress has the ability to use the “Necessary and Proper Clause” found in the Constitution. This clause ensures Congress’s ability to construct an institution to better assist them in collecting taxes, borrowing money, and regulating commerce if it is necessary and proper. The debate over what is “necessary and proper” can go on for ages. However, the Court found “After deliberate consideration, it is unanimous and decided opinion of this court that the act to incorporate the bank of the United States is a law made in pursuance of the constitution, and is a part of the supreme law of the land.” In deciding whether the Maryland act of imposing taxes on all banks was constitutional or unconstitutional, the Court decided that the tax was unconstitutional based on the fact States do not have the authority and power to intervene in Constitutional laws enacted by Congress. Because states have no power to impose such a tax, the states have “no power to burden operations of the constitution enacted by Congress.”

IMPORTANCE

The case of McCulloch v. Maryland is a landmark United States Supreme Court case because of the use of the Necessary and Proper Clause. Marshall’s interpretation of the clause has had lasting, significant effects. Because of Marshall’s interpretation of the Necessary and Proper Clause, Congress now exercises many powers that are not specifically named within the Constitution but are implied by the Constitution instead. Marshall’s objective was to allow for the Constitution “to endure for ages to come.”

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