In 1819 the Supreme Court decided McCulloch v. Maryland, addressing the constitutionality of the national bank and the right of states to tax federal agencies.
In 1819 the United States Supreme Court handed down it’s ruling in the case McCulloch v. Maryland. As an example of judicial nationalism, the case presented Chief Justice John Marshall with two issues. Marshall ruled in favor of the federal government, establishing the doctrine of national supremacy. The decision was not popular and prompted angry responses from a number of states, particularly in the South. At the same time, Marshall validated Alexander Hamilton’s 1791 explanation of implied powers in the Constitution as it pertained the constitutionality of the national bank.
Background of McCulloch vs. Maryland
Although the Second Bank of the United States (SBUS) had recently been rechartered by Congress, it was not popular. The national bank had always been associated with wealthy speculators and financial interests in the large cities of the Northeast. In 1819, a panic or economic downtown created unemployment and closed many small businesses. Popular disenchantment blamed the bank.
Because the bank maintained branches in the states, some state legislatures attempted to restrict it through taxation. This was the case in Maryland. In 1818, the Maryland legislature imposed a steep tax on the Baltimore branch of the SBUS. When the agents of the bank refused to pay, the state took the matter to the courts where, ultimately, the Maryland courts upheld the validity of the tax. The bank appealed.
Was the Bank of the United States Constitutional?
The first issue addressed by the high court involved the constitutionality of the bank, a question raised by the Maryland suit. The Supreme Court’s decision was unanimous: no state may tax an agent of the federal government. The Maryland law which had authorized the tax was declared unconstitutional.
Marshall’s opinion was based on his belief that the Constitution derived power from people and not sovereign states. Additionally, Article I Section 8 of the Constitution gave Congress the power to incorporate a national bank. This was consistent with Alexander Hamilton’s 1791 arguments which Marshall read carefully.
In defining implied powers, Marshall concluded that every legislature had to develop means by which it could carry out its direct powers. Thus, the “necessary and proper” clause in Article I (sometimes referred to as the “elastic clause”) gave Congress implied powers to carry out direct powers enunciated in Section 8.
Can a State Tax an Agency of the Federal Government?
If the position of the Maryland legislature prevailed, a system of “dual federalism” would have been created. John Marshall rejected this and defined national supremacy. In any conflict with state law, federal law must always prevail. This argument would be forcefully used in the 1832 Nullification Crisis in South Carolina. Maryland’s attempt to tax the national bank was not only illegal, but, as Marshall stated in his opinion, “the power to tax involves the power to destroy.”
A Legacy of Judicial Nationalism
Although several states advocated for a Constitutional amendment that would allow states to exclude bank branches, other issues soon overtook the debate over federalism versus states’ rights. In 1824 John Marshall would broaden Congressional commerce power (inter-state commerce) in the case Gibbons vs. Ogden.
The Marshall Court left a legacy of defining national supremacy and the power of the Constitution. When Abraham Lincoln became president in 1861, one of his first acts was to reread Marshall’s opinions in order to develop arguments against Southern secession.
- Alfred A. Kelly and Winfred A. Harbison, The American Constitution: Its Origins & Development, Fifth Edition (New York: W. W. Norton & Company, 1976)
- Page Smith, The Nation Comes of Age: A People’s History of the Ante-Bellum Years, Volume Four (New York: McGraw-Hill Book Company, 1981)