McCulloch v. Maryland
In 1819, less than one generation after the American Revolution, many residents were still wary of a government that might overstep its bounds. The U.S. Supreme Court had to wade into a dispute between a federally-chartered bank and the State of Maryland to decide whether the Maryland state legislature had the power to tax the bank – and at the same time determine if Congress held the power to create that bank.
The court’s decision was a landmark case because it set a standard for the Court’s interpretation of Congress’s constitutional powers.
The case, McCulloch v. Maryland, became a political football at the time because one party, the Federalists, believed the Constitution allowed the Congress to create a national bank while the opposing party, the Democrat Republicans, believed that government should remain small and be strictly constrained to a literal interpretation of its powers conveyed by the Constitution.
To make its finding, the Supreme Court examined the “Necessary and Proper” clause of Article One of the Constitution, which a majority believed gives Congress an “elastic” rather than literal ability to create entities such as chartering the First Bank, in Philadelphia. Since the justices found that Congress does have that authority, its decision was against the state of Maryland’s attempts to tax the bank.
The Court’s decision set a standard for states’ interactions with federal laws and institutions, determining that states cannot interfere with Congress’s constitutional powers.
The Maryland legislature contended that the Second Bank of the United States, which was a branch of the original bank chartered by Congress and located in Philadelphia, was not subject to taxes levied on its transactions by the State of Maryland. McCulloch was the bank employee who refused to pay Maryland’s taxes and thus was found guilty and fined for disobeying the law. Since the Supreme Court decides the constitutionality of state laws, the case was appealed to that body.