McCulloch v. Maryland.notebook
November 12, 2014
A Constitutional Test of Federalism
McCulloch v. Maryland (1819)
After the War of 1812, the U.S. government needed additional funds to pay off the debts of the war. Instead of being able to borrow money from one institution, the government had to work with multiple state banks. The First Bank of the United States
had been created in 1791, but the state's greatly opposed the nationally chartered bank and the Congress let the bank's charter expire in 1811. As a result, in 1816, Congress opted to set up The Second Bank of the United States
with branch offices in multiple locations. Many states opposed the National Bank because the state banks then had to compete for business. In response, Maryland passed a law requiring the national bank to pay a heavy tax to the state of Maryland. James McCulloch, the bank's cashier, refused to pay the tax. McCulloch was convicted of failing to pay the tax and was fined $2,500. He appealed the case to the Maryland Court of Appeals, which upheld the decision of the lower court and affirmed McCulloch's conviction. The dispute reached the Supreme Court of the United States. The Chief Justice of the US Supreme Court at the time was John Marshall.
McCulloch v. Maryland.notebook
November 12, 2014
The Court considered these two key questions:
1. Does Congress have the power to establish a national bank? Prior to 1816 banks had been governed by the states.
2. Can a state, in this case Maryland, place a tax on a nationally chartered bank?
These three parts of the Constitution were considered during the case:
1.The Elastic Clause (a.k.a. the Necessary and Proper Clause­­#18)­­ the implied powers of the federal government...these things the federal government MUST do, but are not specifically stated in the Constitution.
2. The Supremacy Clause­­ who wins in a conflict between the states and the
federal government
3. The Tenth Amendment­­ the reserved powers of the state
U.S. Supreme Court Chief Justice John Marshall (1801­1835)
McCulloch v. Maryland.notebook
November 12, 2014
Main Arguments For McCulloch (the federal government)
1. Although the power to establish a national bank is not mentioned in the Constitution it is implied through Congress's power to tax and spend
2. A national bank is necessary to conduct the financial affairs of the country
3. If a state could tax a national bank a heavy enough tax could ultimately force the national bank out of business
Main Arguments For Maryland (the state governments)
1. The right of the national government to establish a bank is not specifically mentioned in the Constitution
2. The power to establish banks had in the past been reserved for the states
3. States have the power to determine
taxes for institutions and businesses within their borders
McCulloch v. Maryland.notebook
November 12, 2014
The Court's Decision
The Court ruled unanimously in favor of McCulloch (the federal government) on both key questions. The Court stated that: 1. the power to establish a national bank is indeed implied through the Elastic Clause. This established the "implied" powers view for new federal laws and actions
2. states do NOT have the power to tax a federal establishment because it would challenge the federal government's supremacy.