McCulloch v. Maryland Summary
In 1816, President James Madison and Congress chartered The Second Bank of the United States to help deal with debt incurred by the Federal Government during the War of 1812. Two years later, during a wave of bank failures, the state of Maryland passed legislation to levy taxes on any bank “any bank not chartered within the state.”
The Baltimore branch of the Second Bank of the United States was the only bank in Maryland that was chartered outside of Maryland. The bank refused to pay the tax and the state sued the cashier, James W. McCulloch, who claimed Mayland did not have the authority to tax the bank.
A state court ruled Second Bank of the United States was unconstitutional, and an appeals court upheld the decision. McCulloch appealed to the Supreme Court and Chief Justice John Marshall, who agreed to hear the case in 1819.
The Supreme Court ruled the bank had been incorporated by the Federal Government, under Article 1, Section 8 of the Constitution — the “Necessary and Proper Clause,” which made it constitutional. Further, states did not have the power to levy taxes on the Federal Government, which was viewed as an attempt to undermine the authority of the “government of the Union.”
McCulloch v. Maryland Facts
- Main Issue — The case centered on whether Maryland had the authority to tax the Bank of the United States and if Congress had the power to establish such a bank.
- Argument — Alexander Hamilton, while serving as Secretary of the Treasury, proposed the creation of the First Bank of the United States, as part of his financial plan. President George Washington signed the bill on February 25, 1791, which gave the bank a 20-year charter.
- Argument — The proposal faced opposition on both practical and constitutional grounds — especially from Thomas Jefferson and James Madison, who argued that there was no enumerated power in the Constitution granting Congress the authority to create a bank.
- Argument — Supporters of the bank relied on the “Necessary and Proper Clause” in the Constitution to justify its establishment.
- Interesting Fact — Maryland sued McCulloch, a bank cashier, to recover a tax on the bank’s notes. State courts initially ruled in favor of Maryland.
- Court Opinion — Chief Justice John Marshall, known for strengthening the Supreme Court’s role in the government, delivered the opinion, which upheld Congress’s power to create the bank and established that states could not tax federal entities, setting a precedent for the supremacy of federal law over state law.
- President — James Monroe was President in 1819.
- Time Period — McCulloch v. Maryland is part of the Era of Good Feelings.
- APUSH Unit — McCulloch v. Maryland is part of AP US History Unit 4: 1800–1848.
- Famous Quote — John Marshall wrote, “the power to tax is the power to destroy.”
Significance of McCulloch v. Maryland
McCulloch v. Maryland is important to United States history because it led the Supreme Court to define the relationship between the Federal Government and states and determine the Second Bank of the United States was constitutional. The court’s decision was enabled by Marbury v. Madison (1803), which established the authority of the Supreme Court. McCulloch v. Maryland is famous for:
- Upholding the power of Congress to establish the Second Bank of the United States through the “Necessary and Proper Clause.”
- Affirming the authority of the Constitution and Federal Laws over state laws through the “Supremacy Clause.”
- Determining the “constitutional sovereignty” of the U.S. lies within the people, who both created the Constitution and are represented by it.
History and Overview
- The Supreme Court’s ruling in McCulloch v. Maryland (1819) affirmed Congress’s implied powers under the Necessary and Proper Clause of Article I, Section 8 of the Constitution.
- This case involved the creation of the Second Bank of the United States and the state of Maryland’s attempt to tax it.
- Chief Justice John Marshall authored the influential opinion in this case, which granted Congress extensive discretionary power and rejected radical states’ rights arguments.
Second Bank of the United States
- The case revolved around the constitutionality of Congress chartering the Second Bank of the United States in 1816.
- Although the bank was privately owned, it was the repository for federal funds and had the authority to issue legal tender notes.
- In exchange for its unique position as the holder of federal funds, the bank provided loans to the Federal Government instead of paying taxes.
- State banks, which viewed the Second Bank of the United States as a competitor, were hit hard by the economic depression that followed the War of 1812.
Maryland Targets the Second Bank of the United States
- Maryland, one of the states experiencing bank failures, imposed a tax targeting “any bank not chartered within the state.”
- The Bank of the United States was the only bank that fell into that category.
- When the Baltimore branch refused to pay the tax, Maryland initiated legal action against James McCulloch, the branch’s cashier, to collect the debt.
- McCulloch defended by claiming that the tax was unconstitutional.
- A state court initially ruled in favor of Maryland, and this decision was upheld by the court of appeals.
- McCulloch appealed the case to the U.S. Supreme Court.
- The Supreme Court undertook a review of the case in 1819 to answer the constitutional questions surrounding the authority of Congress to establish the bank and Maryland’s authority to levy taxes on the Federal Government.
The Necessary and Proper Clause — Congress Has the Authority to Establish the Second Bank of the United States
Chief Justice Marshall authored a unanimous opinion in which the Court declared the constitutionality of the Bank of the United States and the unconstitutionality of Maryland’s tax on it.
- The Court’s decision was based on its interpretation of the “Necessary and Proper Clause” of Article I, Section 8, which grants Congress the authority to pass laws deemed “necessary and proper” for executing its “enumerated powers.”
- The enumerated powers of Congress include the regulation of interstate commerce, tax collection, and borrowing funds.
- The Court stated that if an action taken by Congress pursued legitimate ends — within the scope of the Constitution — and employed means that were appropriate, not prohibited, and consistent with the Constitution, it was considered constitutional.
- The creation of the Second Bank was deemed constitutional under the Necessary and Proper Clause because it was linked to Congress’s powers of taxation, and regulation of interstate commerce.
The Supremacy Clause — Maryland Does Not Have the Authority to Tax the Federal Government
The Court’s second ruling centered on Maryland’s inability to tax the Bank due to the “Supremacy Clause” found in Article VI of the Constitution.
- Marshall emphasized that the laws of the United States hold precedence over conflicting state laws, saying, “the government of the Union, though limited in its powers, is supreme within its sphere of action,” and its laws, when consistent with the Constitution, are the supreme law of the United States.
- Maryland’s attempt to tax the Second Bank of the United States was seen as unconstitutional. Marshall said, “the power to tax is the power to destroy.”
- Maryland’s attempt to tax the bank was viewed as undermining the laws and institutions of the United States, which made it unconstitutional.
Sovereignty of the U.S. Lies with the People
- The Court asserted that the ultimate political authority — or “sovereignty” — of the U.S. resides with the people as a whole, rather than with the individual states that make up the Union.
- It argued the U.S. is not just a loose confederation of states but a nation characterized by “constitutional sovereignty,” where authority is vested in “the people” who created the Constitution and are governed by it.
- Maryland’s tax was deemed unconstitutional because it infringed upon “constitutional sovereignty” by imposing a levy on all U.S. citizens, who were represented by the Second Bank of the United States.
McCulloch v. Mayland APUSH
Use this information to review McCulloch v. Maryland, the Madison Administration, and the Era of Good Feelings for the AP US History Exam. Also, be sure to look at our Guide to the AP US History Exam.
McCulloch v. Maryland APUSH Definition and Significance
The definition of McCulloch v. Maryland for APUSH is a landmark U.S. Supreme Court case in 1819, that dealt with the constitutionality of a Maryland state tax on the Second Bank of the United States, a federal institution. Chief Justice John Marshall’s opinion established two critical principles. First, it affirmed the federal government’s authority to establish a national bank under the Necessary and Proper Clause of the Constitution, expanding federal powers. Second, it declared that states did not have the authority to tax federal institutions or interfere with the legitimate operation of the Federal Government, asserting the supremacy of federal law over state law.
The significance of McCulloch v. Maryland for APUSH lies in its assertion that the laws of the Federal Government are supported by the “sovereignty” of the people, who are all bound together under the Constitution.