MCCULLOCH V. MARYLAND (1819) CASE SUMMARY

In 1790 Alexander Hamilton, the first Secretary of the Treasury, recommended that Congress charter a Bank of the United States, and in 1791 Congress did so. Hamilton argued that Congress’ constitutional power to create the bank resulted from certain powers delegated to Congress in Article I, Section 8, such as the power “to coin money and regulate the value thereof,” when combined with the power given Congress in the 18th paragraph of Section 8 “to make all laws necessary and proper for carrying into execution the foregoing powers.” Secretary of State Thomas Jefferson argued, on the other hand, that Congress did not have the power under the Constitution to create a bank since nowhere in Article I, Section 8 is such a power granted Congress. Therefore, Jefferson said, under the Tenth Amendment, that power belongs only to the states.

The charter of the First Bank of the United States was allowed to expire, but in 1816 Congress chartered the Second Bank of the United States. The largest branch of this bank was located in Baltimore, Maryland. Like Thomas Jefferson at an earlier time, the state of Maryland did not believe that the U.S. Congress had the power under the Constitution to create a bank, and therefore, Maryland decided to drive the Baltimore branch of the Bank of the United States out of business. In 1818 the Maryland Legislature passed a statute that taxed all banks operating in the state that were not chartered by the state, namely the branch of the Second Bank of the United States in Baltimore. The statute levied a tax of approximately 2 percent on the value of all notes issued by the Bank, or a flat annual fee of $15,000. James McCulloch, the Chief Cashier of the Baltimore branch, refused to pay the tax. The state of Maryland brought suit against McCulloch. After the highest state court in Maryland ruled that McCulloch had to pay the tax, McCulloch appealed to the U.S. Supreme Court.