The sticky relationship between the federal government and the state governments of the United States has waxed and waned over the centuries. However, one Supreme Court case set the baseline for federal power over the states: McCulloch v. Maryland in 1819.
I’m going detail many different Supreme Court cases throughout history, but the precedent set by McCulloch v. Maryland cannot be understated. It redefined the power of the Constitution and greatly loosened the restrictions on federal power that the Constitution provided.
Facts of the Case
I’ll start with some facts of the case.
The case was decided on March 6, 1819 and dealt with the constitutionality of a national bank as well as the power of the states to tax federal property.
There was much debate about the creation of a national bank during the founding era. In fact, this was one of the most hotly debated topics for the first few years of the government’s existence, with Alexander Hamilton and George Washington arguing on behalf of a national bank and James Madison and Thomas Jefferson arguing against it.
Hamilton believed that without a national bank to streamline the financial structure of the federal government, as well as pay off debts from the Revolutionary War, the federal government would be unsustainable.
Madison and Hamilton argued that a national bank was not explicitly listed in the enumerated powers of the federal government, specifically Article 1 Section 8 of the U.S. Constitution. And…well, they were right. It wasn’t mentioned in the enumerated powers.
Hamilton argued for a loose interpretation to allow for a national bank and he eventually got his way. However, the charter creating the bank expired in 1811 and Congress didn’t reauthorize it.
Very little time elapsed, though, and Congress was vying for a new national bank again. The War of 1812 came to a close and the United States needed some financial stability. Congress introduced legislation to institute a Second National Bank. After years of debate, the bill passed in 1816.
Then in 1816, Maryland, in repudiation of the establishment of a national bank (something they viewed as dangerous to their state power and state banks) passed a law taxing all banks and branches that were not chartered by the state legislature. And in this scenario, there was only one bank in Maryland that fell victim to this tax: the Second National Bank.
James McCulloch, the head of this branch in Maryland, refused to pay the state tax. This raised many Constitutional questions. First, can the state government tax a federal institution? And second, is it Constitutional for the federal government create a national bank?
So, the questions went to the Supreme Court.
The Case and Opinion
Here’s the irony about this case. The unanimous Marshall Court decision fundamentally changed the relationship between the state and federal government and redefined Congressional power under the Constitution. However, the Second National Bank was eventually eliminated in 1832 under Andrew Jackson due to what Jackson believed was the unconstitutional power it held. The United States then operated without a national bank for almost entire century following the fall of the Second National Bank.
So, while the bank failed, the precedent and new constitutional interpretation as a result of this case has never failed to affect every aspect of American politics since.
Through a unanimous decision, the Court decided that:
1) It is Constitutional for the federal government to create a national bank even though the power to do so is not explicitly stated in the enumerated powers of the Constitution.
2) The states do not have the power to tax the federal government or federal institutions. The federal government struck down the Maryland law as illegitimate.
Both opinions of the Court changed the power of the Constitution rather drastically, but, the claim that the government had the power to create the national bank fundamentally reshaped the power of the Constitution.
John Marshall, Chief Justice at the time, tended to take a broader interpretation of the Constitution then some of his contemporaries. Marshall argued that the objective of the Constitution was to help stimulate commercial development and prosperity in the country. Further, he argued that, even though the word “bank” was not explicitly listed in Article 1 Section 8 of the U.S. Constitution’s enumerated powers, the power to manage money is and therefore the Constitution implies that Congress is empowered to created a bank. Essentially, it’s “necessary and proper” to create a national bank in order to lay and collect taxes, issue currency and borrow funds.
This interpretation of the “necessary and proper” clause endowed this clause with an immense amount of flexibility and expansion. Marshal explained:
“Let the end be legitimate, let it be within the scope of the Constitution, and all means which are appropriate, which are plainly adapted to that end, which are not prohibited, but consistent with the letter and spirit of the Constitution, are constitutional”
This is a major re-interpretation. One of the key and most essential elements of the Constitution is its power to define and confine the federal government’s power. It’s primary goal? To keep the U.S. government from ever holding arbitrary (unconfined, undefined and limitless) power.
Hence, Madison and the others at the Constitutional Convention were careful to detail exactly what topics Congress could make law about and emphasized that anything not mentioned was left to the states. There was no pretense that the federal government had the power, on its own, to determine what ends were legitimate or appropriate if such ends were not inextricably tied to the enumerated powers of the Constitution. Such discretion in the federal government could turn both arbitrary and dangerous since it lacks a clear limit on what can or cannot be deemed “legitimate” ends.
And yet, the Supreme Court justified Congressional actions outside of their explicit Constitutional powers by arguing that such actions were for legitimate and appropriate ends, thereby signifying that Congress can make law outside of their defined and limited powers as long as those in government deem it “legitimate”.
A key point to notice here is that the Supreme Court handed Congress more power. Congress had no incentive, therefore, to push back against the growth in the Court’s power, since the growth in the Court’s power resulted in a growth in Congressional power.
The second question that the Court answer directly affected the state and federal relationship. Can a state tax a federal bank?
John Marshall gave a resounding “No”. He said that, since the U.S. government was founded by the people, not the states, (something that scholars would debate) the U.S. government was supreme to exercise its powers over that of the states.
Marshall famously said that “the power tax is the power to destroy” (The irony, of course, being that the federal government must then hold the power to destroy?). Marshall argued that since the federal bank was constitutional, it was supreme. Since it was supreme, it could not be taxed by the state government–it was immune from state power. He said that “since the power to destroy a federal agency would confer upon the states supremacy over the federal government, the states may not tax any federal instrument. Hence the Maryland law was unconstitutional” (Wilson).
The writing was on the wall. This case change the defined limitations of the Constitution into undefined and formless limitations subject to the whim and will of the ever growing Court and the whim and will of a power-greedy Congress.
The ever expanding, limitless federal power we see today can be tied quite neatly back to this one, seemingly harmless, Court ruling.
The Liberty Belle
Wilson, James Q. Dilulios, Bose and Levendusky. American Government: Institutions and Policies 2021.