McCulloch v. Maryland (1819)

Congress chartered the Second Bank of the United States in 1816, and several states hostile to it tried to tax it out of existence. Maryland imposed a tax on banks not chartered by the state, payable through stamped notes or an annual fee of 15,000 dollars. James McCulloch, cashier of the bank's Baltimore branch, refused to pay, and Maryland sued. The case raised two questions: whether Congress could create a bank at all, and whether a state could tax it.

Writing for a unanimous Court on March 6, 1819, Chief Justice John Marshall answered yes to the first and no to the second. The Constitution does not list the power to charter a bank, but the Necessary and Proper Clause lets Congress choose any appropriate means to carry out its enumerated powers, such as taxing, borrowing, and supporting armies, as long as the end is legitimate and the means are not prohibited. Marshall also held that because the power to tax involves the power to destroy, states may not tax an instrument of the federal government, since that would let one state undermine laws made by the whole nation.

McCulloch remains the foundational statement of broad federal power under the Necessary and Proper Clause and of federal supremacy over the states. The Supreme Court relied on it in upholding federal laws from the New Deal to the Affordable Care Act, and the doctrine of intergovernmental immunity it established still limits how states may tax or regulate federal operations.