McCulloch V. MarylandMcCulloch V. Maryland18191819

Background Info/FactsBackground Info/Facts

April 1816 Congress chartered the Second April 1816 Congress chartered the Second National BankNational Bank

Some people felt that the National Bank harmed Some people felt that the National Bank harmed State economies and businessesState economies and businesses

Maryland Passed a Stamp tax on paper used to Maryland Passed a Stamp tax on paper used to make money – only for Federal Banks affecting make money – only for Federal Banks affecting the National Bankthe National Bank

James McCulloch refused to pay the tax and the James McCulloch refused to pay the tax and the state of Maryland brought a suit against him.state of Maryland brought a suit against him.

Background Info/FactsBackground Info/Facts- Second Second National Bank established in Maryland National Bank established in Maryland - Many people opposed the bank being established in the Many people opposed the bank being established in the

state of Maryland so…state of Maryland so…- Maryland placed a tax on the bank Maryland placed a tax on the bank since it was residing since it was residing

in the state of MDin the state of MD- James McCulloch (bank clerk) wasn’t obeying the taxJames McCulloch (bank clerk) wasn’t obeying the tax- McCulloch taken to court by the state of Maryland and McCulloch taken to court by the state of Maryland and

was ruled against for breaking state law of NOT was ruled against for breaking state law of NOT imposing the taximposing the tax

* Case appealed to the highest court level in MD and went * Case appealed to the highest court level in MD and went to Supreme Courtto Supreme Court

Questions: Questions: National Law V. State LawNational Law V. State Law

• Does congress have the power to Does congress have the power to establish a bank in the state of Maryland?establish a bank in the state of Maryland?

• Does the state of MD have the power to Does the state of MD have the power to tax the bank for being established?tax the bank for being established?

Does any state have the right to tax the Does any state have the right to tax the United States Government (Federal)?United States Government (Federal)?

Is the National Bank legal – underlying Is the National Bank legal – underlying question?question?

Arguments for Both SidesArguments for Both Sides MarylandMaryland

Did have the right to tax because it was not forbidden by the Did have the right to tax because it was not forbidden by the Constitution!Constitution!

The National Bank is not even legal!The National Bank is not even legal! McCullochMcCulloch

States forbidden to tax anything of the National government States forbidden to tax anything of the National government beyond real property!beyond real property!

Necessary for Congress to create and coin money, collect taxes Necessary for Congress to create and coin money, collect taxes and borrow money!and borrow money!

Necessary and Proper Clause – Elastic Clause! Necessary and Proper Clause – Elastic Clause!

Article 1 Section 8 Clause 18 (Toma!)Article 1 Section 8 Clause 18 (Toma!)

RulingRuling

1.1. Congress HAS the power to establish a Congress HAS the power to establish a national bank in the state of Maryland!national bank in the state of Maryland!

2.2. Maryland DOES NOT have the power to tax Maryland DOES NOT have the power to tax the bank!the bank!

• taxing a national institution is an indirect tax on taxing a national institution is an indirect tax on citizens of other states citizens of other states UNCONSTITUTIONAL!UNCONSTITUTIONAL!

• Since the bank is legal the tax is a violation of Since the bank is legal the tax is a violation of the principle of National Supremacy!the principle of National Supremacy!

SignificanceSignificance

* States are bound to obey the Constitution * States are bound to obey the Constitution under the under the Supremacy Clause Supremacy Clause (Supreme (Supreme Law of Land)Law of Land)

* * Necessary and Proper Clause – Necessary and Proper Clause – establishing banks is not listed in Const., establishing banks is not listed in Const., but to do what is “necessary and proper” but to do what is “necessary and proper” to carry out commerce and monetary to carry out commerce and monetary issues is!issues is!