McCulloch v. Maryland established the framework for the exercise of broad federal power and for the immunity of the federal government from regulation by the states. .

The Background
In the early days of the Republic, Alexander Hamilton proposed the creation of a national bank, which would issue notes promising to pay their holder with "specie," i.e., gold or silver. So long as holders believed they would be paid, the notes would be "as good as gold." Fearing that the government would issue notes beyond its ability to redeem, Hamilton insisted on private control. Despite the opposition of James Madison and Thomas Jefferson, Congress in 1791 incorporated the First Bank of the United States. After twenty years, the bank's charter was not renewed in 1811.

The lack of a national bank seemed to impair the financing of the War of 1812, and, in 1816, Congress incorporated the Second Bank of the United States. The United States government held one-fifth of the stock of the bank and appointed one-fifth of the directors, but private parties held the controlling interest.

The national bank redeemed its notes at all branches, which resulted in notes issued by its branches in the west and south being redeemed in eastern branches. To get the specie (gold or silver), the eastern branches of the Bank of the United States redeemed notes they held that were issued by state banks. The demand on the state banks for specie forced them to curtail credit, and some states struck back. Maryland imposed a tax on bank notes issued by any bank not chartered by the state. James McCulloch, the manager of the Baltimore Branch of the Bank of the United States, refused to pay the tax. John James, a Maryland official, brought suit for the statutory penalty.

Maryland argued that the federal government could not insulate the bank from taxes by incorporating it, because the federal government lacked power to charter a bank. Luther Martin, arguing for the state, noted that the Constitution did not expressly grant Congress power to create corporations, and a national bank was not "necessary" to accomplish any government purpose that could not be accomplished without it. Supreme Court Chief Justice John Marshall's response in the 1819 opinion in McCulloch v. Maryland has been the touchstone for federal power ever since.

The Decision
Marshall asserted that the Constitution was created by the people rather than the states, although the people acted within their states. He pointed to the function of the Constitution as a broad charter that could not describe in detail all of the powers of government. In considering the powers granted, he said, "we must never forget that it is a constitution that we are expounding."

Approaching federal powers from this perspective, Marshall reasoned that it was in the interest of the nation to facilitate the execution of the powers granted by the Constitution. In this light, the constitutional power "To make all Laws which shall be necessary and proper for carrying into Execution the foregoing Powers" allowed Congress to select whatever appropriate means it thought best. Thus, Marshall wrote, "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 consist with the letter and spirit of the constitution, are constitutional."

The Bank of the United States, then, was an appropriate means to accomplish a number of specific ends in the Constitution-from taxing and borrowing to regulating commerce and conducting war.

Maryland also argued that its tax was proper because the federal government did not expressly prohibit its imposition. The bank itself, after all, was primarily a private entity. Marshall might have responded that the discriminatory nature of the tax, which applied only to the bank chartered by the federal government, was the problem. Instead, he used arguments from the structure of government to contend that the Bank functions could not be taxed, regardless of how the state taxed state-chartered banks. It was in this context that he wrote, "the power to tax involves the power to destroy." He argued that the state, composed of only a part of the people of the United States, cannot have power to control the whole.

The Aftermath
Marshall's opinion was the object of bitter attack. Indeed, he even wrote and published a defense of his opinion. While his critics feared that the reasoning of the opinion could justify any law, Marshall pointed to the requirement that the means be "appropriate" and "plainly adapted" to the legitimate end. For more than a century, the opinion could be used to support federal action, but also cited to limit it.

When President Franklin Roosevelt pressed for broad national power to deal with the Depression and when Congress later sought to enact broad civil rights laws, Marshall's reasoning in McCullough justified their actions. His broad interpretation of the Constitution as granting federal power to deal with problems regained prominence. McCulloch is seen as one of the most important cases in American history.

Farber, Daniel A. "The Story of McCulloch: Banking on National Power." Constitutional Law Stories. Ed. Michael Dorf. New York: Foundation Press, 2004.

Plous, Harold and Gordon Baker. "McCulloch v. Maryland: Right Principle, Wrong Case,"Stanford Law Review. 9 (1957): 710-30.

Gunther, Gerald, ed. John Marshall's Defense of McCulloch v. Maryland. Stanford, Calif.: Stanford University Press, 1969.