McCulloch v. Maryland

In 1816, the federal government had established the second bank of the United States, operating in Philadelphia. In order to facilitate its operations, the bank set up a branch in Baltimore in 1818 and appointed James W. McCulloch as cashier in that branch. In February of 1818, the state of Maryland passed a law requiring all banks operating in the state to obtain a license from the state and to use a state stamp on all papers issued. The federal bank under McCulloch began operations in Baltimore in May of 1818; however, McCulloch did not obtain a license or use the state stamps. Accordingly, the state brought action against McCulloch, and fined him $2500. He appealed the fine to the Supreme Court.

The counsel for the state of Maryland pointed out that the Constitution did not specifically grant power to the federal government to establish a bank. When the first bank of the U.S. had been established in 1791, it might have been justified as an implied power of the federal government in collecting taxes and providing for a single currency. However, since the 1790s, many state banks had grown and could now perform those functions. Furthermore, when Congress set up the Second Bank in 1816, it did not grant power to the directors of that bank to establish branches. When such a branch was established, it could not claim to be exempt from the power of the states to tax, as that would be an invasion of state sovereignty.

McCulloch's counsel argued that the federal government had the right to charter a bank as part of its regular financial operations. He further pointed out that a state could not tax a federal activity. If that were allowed, it would allow the separate states to control the federal government and would weaken the federal government to the point that it resembled the government under the Articles of Confederation. He pointed out, in addition, that if a bank were constitutional, branches of the bank were constitutional.

John Marshall wrote the opinion of the Court, accepting McCulloch's arguments but going much further. Marshall noted that in Article 10 of the Constitution, the founding fathers had left out the phrase "expressly" in referring to powers granted to the federal government. He noted that the government must have ample means to achieve defense and the regulation of commerce. National defense requires that federal bills be paid in distant and remote parts of the country. The powers granted to the government implied ordinary and ample means of implementing those powers. Defense required means of moving funds from place to place, and the bank was necessary to the ends. It was convenient and useful to the government to operate a bank, and establishing branches was an ordinary and necessary aspect of the operation. He agreed with Webster that a state could not tax the ordinary and useful operations of the federal government, and so the Court unanimously ruled in favor of James McCulloch.

The McCulloch decision established that the federal government had to rely on implied powers in the Constitution if it was to operate. The doctrine of implied powers justified many actions of the federal government as it expanded its role in the growing nation. It continued to be cited during New Deal legislation in the 1930s and federal civil rights legislation in the 1960s.