Citation. 17 U.S. (4 Wheat.) 316, 4 L.Ed. 579 (1819).
Brief Fact Summary.
Maryland taxed the Bank of the United States by requiring the Bank to issue notes only “upon stamped paper.” McCulloch refused to pay the tax.
Synopsis of Rule of Law.
Congress, through the Necessary and Proper Clause (Article I, Section 8), has broad authority to enact laws, even when the power was not expressly granted in the Constitution. Further, the Constitution is the supreme law of the land and thus any law within its scope may not be restricted by a state law.
After a debate between Alexander Hamilton and Thomas Jefferson about the constitutionality of a national bank, President George Washington signed a bill to incorporate the First Bank. However, the Bank fell out of favor, and its charter was not renewed. In 1816, President Madison approved a plan for the second Bank of the United States. Some states believed that federal banks hurt their state-owned banks and passed legislation either prohibiting federal banks from being chartered within their borders or taxing them excessively. Maryland taxed the Bank of the United States by requiring the Bank to issue notes only “upon stamped paper.” The Bank could avoid the tax by paying the state $15,000 annually. Each time the Bank issued notes on unstamped paper, it would be fined $500. McCulloch, the cashier for the Bank, refused to pay the tax.
(1) Does Congress have the power to incorporate a bank even though the Constitution does not expressly provide for a bank?
(2) If so, may a State tax a federally incorporated bank?
CHIEF JUSTICE MARSHALL holding:
(1) Yes, Congress has the power to incorporate a bank.
(2) No, a State may not effectively repeal a Congressional act through a tax.
(1) This was the second bank incorporated by Congress, with the first one being deemed constitutional after a debate among the Framers. The State of Maryland argued that the Necessary and Proper Clause (Art. I, Sec. 8) restricted Congress’ power to enact laws in that any law enacted by Congress must be both “necessary and proper.” The Court, however, interpreted the clause to be a grant of power, granting Congress authority to enact laws that are “appropriate.” The Court reasoned that the Necessary and Proper Clause was a grant of power for two main reasons: (1) the Clause was placed among Congress’ powers, and (2) by its terms, the Clause enlarges Congress’s powers.
Although the power to incorporate a bank was not expressly mentioned in the Constitution, the Constitution was purposefully written in general terms. To encompass everything that Congress could do in one document would be to create a code, not a constitution, incomprehensible to most citizens. The Constitution outlines the federal powers and includes the power “to lay and collect taxes, to borrow money, to regulate commerce . . . .” The means Congress may take to reach its constitutional ends may be achieved however it deems “necessary and proper.” If this clause had been intended to be restrictive, as Maryland argued, the Framers would have written “absolutely necessary” or would have written something like “no laws shall be passed but such as are necessary and proper.” The Court would violate separation of powers if it tried to determine the necessity of each legislative decision. Therefore, so long as Congress acts pursuant to the Constitution and within its scope, its actions are constitutional.
(2) States may tax imports and exports only to pay for their inspection laws, and they may collect property taxes on federal properties as they would other properties, but states may not tax federal operations as Maryland did here. To allow Maryland to tax federal operations would be to allow states to effectively repeal federal legislation, making the states supreme to the Union. The Union may tax the states because the Union was created by the people of each state, but to allow the states to do this would be to put the part before the whole, enabling states to control institutions beyond their boundaries. The Constitution is supreme to state laws and thus state laws may not burden federal laws enacted within the scope of the Constitution.