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Something you can bank on – federalism comes out on top (McCulloch v. Maryland)

McCulloch v. Maryland

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McCulloch v. Maryland, 17 U.S. 316 (1819), is one of the earliest and most significant United States Supreme Court decisions to deal with federalism.

It all began in the year 1816, when Congress created the Bank of the United States. Shortly afterward, the national bank opened a branch in Maryland. The state then imposed a $15,000/year tax on all out-of-state banks operating within its borders. At the time, the national bank was the only out-of-state bank, and thus it was the only bank subject to the tax.

James McCulloch, the cashier of the national bank, refused to pay the tax, and Maryland sued. The case was litigated all the way to the U.S. Supreme Court.

Two constitutional questions were at the center of the dispute:

(1) whether Congress had the constitutional authority to create the bank, despite the fact that no enumerated power authorized it to do so, and

(2) whether a state could tax a federally created bank.

Chief Justice John Marshall authored the unanimous decision, holding that Congress had the implied power under the Necessary and Proper Clause to pass any law useful or convenient for carrying out its explicit powers. Because Congress had various enumerated powers related to raising and distributing funds, it therefore had the implied authority to create the bank. Further, the Court concluded that Maryland could not inhibit a federal institution with taxation.

Marshall famously reasoned that the power to tax was the power to destroy. In rejecting Maryland’s claim, the Court took a strong stand in support of the authority of the federal government.

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