McCulloch v. Maryland: Law Case Analysis

The widely-known McCulloch v. Maryland case was read by the Supreme Court at the beginning of 1819, with the decision made in March of the same year. The case was based on the fact that in that period, the Second Bank of the U.S. was a permanent establishment that created a number of subsidiaries in some states, including Maryland. However, in 1818, the state government of Maryland decided to impose taxes on the note issues made by banks that were not established by the state itself. Several other states adopted similar practice established by Maryland.

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When James McCulloch, the cashier in the Baltimore subsidiary of the U.S. Second Bank did not agree with paying taxes, he was eventually hauled into the Baltimore County Court, which had imposed a judgement against McCulloch. Despite the fact that McCulloch appealed to a higher court of the state of Maryland, the judgement of the lower court was sustained1. Eventually, the case got to the Supreme Court of the United States which revoked the decision of the state court and declared the actions of the State of Maryland void and unconstitutional (Timberlake, 2013, p. 21).

The decision of the Supreme Court was broadly defended by Chief Justice Marshall, who reported that the ruling supported the constitutionality of the bank at the same time with denying the power of Maryland to impose taxes on any banking operations. Thus, the Supreme Court’s decision in McCulloch v. Maryland permitted the Bank to operate without any attacks on their legal integrity for the next ten years.

Case Principles

The ruling of the Supreme Court in McCulloch v. Maryland made an establishment of two dominant principles within the constitution. The first principle, the doctrine of the implied power, makes an assumption that the proper and the necessity Constitution clause is possible for broad interpretation. Thus, the United States Congress can select appropriate means for carrying out its powers as granted by the U.S. Constitution.

The second principle does not allow the state governments to hinder the federal government’s operations that are permitted by the Constitution. Thus, this principle supports the dominance of the U.S. Constitution as well as the federal laws over the laws of separate states, in cases when state laws conflict with them.

In the long-term process, the ruling in McCulloch v. Maryland has been supportive of the Constitutions’ broad interpretation which makes possible for the federal government to use its powers granted by the Constitution in a flexible manner for meeting new issues that arise as the time changes. Furthermore, the decision in McCulloch v. Maryland can be considered a landmark ruling since it was able to strengthen the power of the Supreme Court in the sphere of judicial review when it comes to the state government’s actions (Hall & Patrick, 2006, p. 30). However, the decision was not supported by many proponents of the state rights and powers, such as the Maryland attorney general Luther Martin, who was responsible for arguing the position of the state in the case (Geer et al., 2016, p. 71).

Despite the fact that the Supreme Court’s ruling in McCulloch v. Maryland had a long-term significance, the decision was not supported in the short term. Maryland was not the only state left unsatisfied by the ruling, Ohio and Virginia also opposed it. For example, Ohio state government passed a law (February 1819) that enforced the collection of disproportionately high taxes for Cincinnati and Chillicothe branches of the National Bank. Furthermore, to defy the decision in the case, the state government of Ohio imposed high taxes for all branches of the national bank in the entire state. Despite this, the officers of the national bank managed to seek an order from the federal court that obliged the state of Ohio to return all money obtained from the tax collection.

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After the ending of the Civil War until the modern days, the equilibrium between the state and federal powers has significantly moved in the favor of the federal government. In the course of the twentieth century, the Supreme Court’s ruling in the McCulloch v. Maryland case has supported the broad application of power on the part of the federal government in the sphere of establishing the programs of social welfare and economy regulation2.

Value of the Decision for the Bank

The ruling of the Supreme Court in McCulloch v. Maryland was no doubt victorious however not surprising. This decision took place at the same time when the U.S. bank had become a center of the economic life of the nation. Bank supporters viewed the decision as an encouragement for their morale and the “restoration of the economic health” (Gunther & Marshall, 1969, p. 6). Furthermore, the decision was not a political threat on the part of the Congress.

Before the case, there were no clear guidelines on what the Congress in allowed to do when it comes to the banking sphere because the Constitution only mentioned what the Congress may do to this extent.

With respect to the Bank, the Supreme Court’s decision offered a solution for a long-term debate of whether the Bank should be constitutionalized. The question about the Bank constitutionalization was essentially the only major and disputable topic that came before the Supreme Court because before the McCulloch v. Maryland case there were no legitimate instances that have direct connections to internal improvements, taxes, and tariffs. Because the Bank was not a majorly popular establishment, it was regarded as the “albatross for the nationalistic cause”3 (Gunther & Marshall, 1969, p. 8). McCulloch, as well as his colleagues at the Baltimore subsidiary of the Second Bank, were at the time suspected of being speculator before the decision was made; furthermore, after the ruling, the suspicions did come true.

Fundamental Issues Contested by the Case

McCulloch v. Maryland case put forward for examination two fundamental issues. The first issue was in whether a separate state has the power to impose taxes on a federal government establishment which carries out rightful governmental actions. The second issue was in whether the decision of the state of Maryland to impose taxes on the Bank was constitutional.

The first issue has a solution in itself because if a federal establishment is supported by the law and acts within the limits of its powers, no state can be allowed to diminish its importance, especially with such interventions like compulsory taxation. For instance, no state can be allowed to set up a turnpike road that will charge the military forces for using the road within the boundaries of that state. Thus, if the establishment is not constitutional, its existence is also deemed unconstitutional, and the dispute about its actions becomes irrelevant. Thus, rather than discussing the constitutionality of the state’s actions, the issue of the case lied in the constitutionality of the Second Bank and its subsidiaries (Hall & Patrick, 2006, p. 34).

The incorporation of an enterprise by the U.S. Congress had been a controversial topic since the proposal to create the First Bank. Because the primary purpose of the Treasury was fiscal in its nature, the process of incorporating both banks was linked to them assisting the Treasury in the collection and payment of the taxes. Furthermore, there was never any proposals that either the First or the Second Bank should have primary control over the financial system, meaning that one of the institutions will become the central bank of the United States.

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Since the Bank was a “fiscal agent of the government” (Timberlake, 2013, p. 23), it possessed the right of opening subsidiary institutions in any state where taxes are paid and collected. Apart from the primary purpose of tax collection and payment, such subsidiaries would perform standard banking operations. To oppose the spread of the subsidiaries, states restricted their activities by imposing taxes or forbidding to authorize such subsidiaries.

Conclusion: Was the Court Right

Answers to the Issues posed by the case were the following: the U.S. Congress does have power under the U.S. Constitution to establish a bank subsidiary in another state while the state of Maryland possesses the power to impose taxes on the Congress-established bank subsidiary. Chief Justice Marshall along with other justices managed to diminish the power of separate states in two aspects. In the fist aspect, they activated the clause of “necessary and proper” which lead to the expansion of possible establishment of laws on the part of the government. In the second aspect, they made the stamp tax imposed by the state of Maryland invalid.

The decision was greatly disputed and opposed in a number of states, Thomas Jefferson called the Supreme Court “a subtle corps of sappers and miners constantly working underground to undermine the foundations of our constitutional fabric” (Constitutional Rights Foundation, p. 19). The state of Ohio continued its opposition to the ruling for the next five years by filing a lawsuit over the bank funds confiscated by the federal government.

Despite the critiques, the ruling of the Supreme Court in McCulloch v. Maryland prevailed. The views about the power of the federal government were significant enough to overshadow the Tenth Amendment to the U.S. Constitution as well as the premise that the federal government can only act in accordance with its powers outlined by the Constitution. It has been concluded that the events following the case have made the U.S. Constitution an evolving document that has an ability to expand and grow at the same time with the ways in which the American society grows. Thus, the Constitution had become capable of adapting to the constantly changing requirements of the society on all levels of its existence.

References

Constitutional Rights Foundation. (n.d.). McCulloch v. Maryland (1819). John Marschall and the Bank Case. Web.

Geer, J., Schiller, W., Segal, J., Herrera, R., & Glencross, D. (2016). Gateways to Democracy: the Essentials. Boston, MA: Cengage Learning.

Gunther, G., & Marshall, J. (1969). John Marshall’s Defense of McCulloch v. Maryland. Palo-Alto, CA: Stanford University Press.

Hall, K., & Patrick, J. (2006). The Pursuit of Justice. Supreme Court Decisions that Shaped America. New York, NY: Oxford University Press.

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Timberlake, R. (2013). Constitutional Money: A Review of the Supreme Court’s Monetary Decisions. New York, NY: Cambridge University Press.

Footnotes

  1. See McCulloch v. Maryland (1819), 17 U.S. (4 Wheat.) p. 316.
  2. See “Chief Justice John Marshall Defends the McCulloch Decision in the Popular Press” in Hall, K.L., & Patrick J. (2006). The Pursuit of Justice: the Supreme Court Decisions that Shaped America, p. 32-33.
  3. See Ellis, R.E. (2007). Aggressive Nationalism: McCulloch v. Maryland and the Foundation of Federal Authority in the Young Republic.
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