McCulloch v. Maryland: Summary, Decision & Significance

Overview

Date: March 6, 1819
Court: U.S. Supreme Court
Decision: Congress has the authority to establish a federal bank, and states cannot tax it.
Significance: Established that the Constitution grants Congress powers not explicitly stated, allowing for future expansion of federal responsibilities.

Early Financial Strategy:
- 1790: Alexander Hamilton, as Secretary of the Treasury, advocated for a federal bank to stabilize the economy, manage public funds, and handle commercial transactions.
- Opposed by Thomas Jefferson, fearing it would be a monopoly favoring merchants over farmers.
- 1791: The first Bank of the United States was established.
- 1811: Bank's charter not renewed, but after financial strains post-War of 1812, a second bank was established in 1816.

Maryland's Taxation Attempt:
- 1818: Maryland imposed a stamp tax on the second Bank of the United States to hinder its operations.
- James W. McCulloch, a bank cashier, refused to pay the tax, leading to a lawsuit by the state of Maryland.
- Initial ruling in favor of Maryland led to an appeal to the U.S. Supreme Court.

Participants:
- Chief Justice: John Marshall
- Maryland's Attorney: Luther Martin
- Bank's Attorney: Daniel Webster
Maryland's Argument:
- The Constitution does not explicitly authorize Congress to create a bank.
- Cited the 10th Amendment, reserving powers not delegated to the federal government to the states.
Bank's Argument (Webster):
- Article I, Section 8: Grants Congress the power to make all laws necessary and proper for executing its powers.
- Creating a federal bank was necessary for tax collection, borrowing money, and other governmental functions.
- Article VI: Federal laws are the supreme law, prohibiting states from contradicting federal laws.

Ruling: Unanimous in favor of McCulloch and the bank.
- Marshall's Opinion:
  - The powers of Congress must include the beneficial execution of its great powers.
  - States cannot tax or impede federal operations as federal laws are supreme.

Impact on Federal Government:
- Allowed for the broad expansion of federal authority.
- Enabled legislation like the New Deal, Social Security, Civil Rights Act, and Affordable Care Act.
Bank's Demise:
- Despite the ruling, political opposition led by President Andrew Jackson resulted in withdrawing federal deposits, weakening the bank.
- 1834: Bank's charter not renewed.
- 1913: The concept was revived with the creation of the Federal Reserve System.
Long-term Significance:
- Paved the way for the administrative state, where government oversight extends to various aspects of American life.

U.S. Supreme Court Opinion, Constitutional Rights Foundation, Federal Reserve History, and various educational resources.