McCulloch v. Maryland: How the Supreme Court Established Federal Power Over States

The 1819 case that settled whether Congress could create a national bank and proved federal law trumps state law.

By Garret Merkley · Explainer · Aug 18, 2026

Branched from The Necessary and Proper Clause: How One Sentence Became the Biggest Constitutional Debate

Quick take

McCulloch v. Maryland (1819) upheld Congress's power to charter a national bank using the Necessary and Proper Clause, even though banking isn't explicitly mentioned in the Constitution.
Chief Justice John Marshall's ruling established that federal law is supreme and states cannot tax federal institutions, a principle called the Supremacy Clause in action.
The case turned on whether the Constitution required a strict, literal reading or allowed Congress implied powers to carry out its enumerated duties.
This decision reshaped American federalism by expanding federal reach and limiting state power to interfere with federal operations.

McCulloch v. Maryland was a Supreme Court case decided in 1819 that answered two foundational questions about American government: Could Congress create a national bank without explicit constitutional permission? And could a state tax that bank? Chief Justice John Marshall's ruling said yes to the first and no to the second—and in doing so, he rewrote how power flows between the federal government and the states.

The Conflict: Maryland Taxes the National Bank

In 1816, Congress chartered the Second Bank of the United States to manage federal finances and regulate currency. The bank opened a branch in Baltimore, Maryland. Two years later, Maryland passed a law taxing any bank operating in the state that wasn't chartered by Maryland—a direct hit on the national bank. The tax was steep: roughly 2% of the bank's note issue, which would have cost the bank thousands annually. When the bank's cashier, James McCulloch, refused to pay, Maryland sued. The case climbed to the Supreme Court.

Maryland's argument was straightforward: the Constitution doesn't say Congress can create a bank. Banking is a state power. If Congress wants to do something not explicitly listed in Article I, it needs a constitutional amendment. Maryland also claimed that states retain the right to tax institutions operating within their borders—that's basic sovereignty. The bank countered that Congress has implied powers to carry out its duties, and states cannot tax federal institutions.

Marshall's Two-Part Solution: Implied Powers and Federal Supremacy

Marshall tackled the first question—can Congress create a bank?—by interpreting the Necessary and Proper Clause. That clause, tucked at the end of Article I, Section 8, says Congress can make laws "necessary and proper" to execute its enumerated powers. Marshall argued that "necessary" doesn't mean absolutely indispensable; it means useful or conducive to carrying out federal duties. Congress has the power to tax, borrow money, and regulate commerce. Creating a bank is a reasonable tool to accomplish those ends. Therefore, Congress can charter a bank without an explicit constitutional grant.

This was a watershed moment. Marshall rejected a strict, literal reading of the Constitution in favor of a flexible one. He wrote: "We must never forget that it is a constitution we are expounding." A constitution, he meant, has to adapt to changing circumstances and cannot list every specific tool a government might need. This opened the door to federal powers far beyond what the Framers explicitly named.

On the second question—can Maryland tax the bank?—Marshall invoked the Supremacy Clause. The Constitution declares that federal law is the supreme law of the land, and state laws that conflict with it are void. A state tax on a federal institution interferes with federal operations and is therefore unconstitutional. Marshall's reasoning: "The power to tax involves the power to destroy." If Maryland could tax the national bank at will, it could cripple or eliminate it. That would let a state nullify federal law, which the Supremacy Clause forbids.

Why This Case Mattered and Still Matters

McCulloch v. Maryland became the constitutional foundation for federal expansion. It gave Congress broad latitude to legislate in areas the Constitution doesn't explicitly cover—from environmental protection to labor standards to healthcare—by framing them as necessary to its enumerated powers. Over two centuries, this principle justified the New Deal, the Civil Rights Act, and modern regulatory agencies. Without McCulloch, the federal government would be a much weaker institution.

The case also settled a core tension in American federalism: are states sovereign entities that can resist federal overreach, or is the federal government supreme within its sphere? Marshall answered decisively: federal law wins when the two conflict. States retain power over their own affairs, but they cannot obstruct or tax federal operations. This principle still governs disputes over federal-state authority today.

The Reaction: States Pushed Back Hard

Southern states, especially, saw McCulloch as a threat to state sovereignty and slavery. They argued for states' rights and even hinted at secession.
The case fueled decades of constitutional debate about whether states could nullify federal law—a question not settled until the Civil War.
Even today, disputes over federal power (healthcare mandates, immigration enforcement, gun regulations) echo McCulloch's core tension.

Key Principles Established

The Necessary and Proper Clause grants Congress implied powers beyond those explicitly listed.
The Constitution is flexible and must be interpreted in light of practical governance needs, not rigid literalism.
Federal law is supreme; states cannot tax, regulate, or interfere with federal institutions.
The scope of federal power is broad, limited mainly by the courts' interpretation of what is truly necessary to execute enumerated powers.

Why didn't Congress just amend the Constitution if it wanted to create a bank?

An amendment requires approval from two-thirds of both houses and three-fourths of the states—a much higher bar than a simple congressional vote. Marshall's ruling on implied powers avoided this cumbersome process and gave the federal government flexibility to adapt to new circumstances without constant amendments.

Could a state legally tax a federal institution today?

No. McCulloch's principle still holds: states cannot tax federal agencies, federal employees' salaries, or federal property. However, states can tax private contractors who work for the federal government, and the line between 'federal' and 'private' sometimes gets blurry in litigation.

Does McCulloch mean the federal government has unlimited power?

Not quite. The implied powers must still be tied to an enumerated power (taxing, borrowing, regulating commerce, etc.). A federal law that has no rational connection to any enumerated power could theoretically be struck down. In practice, courts have found very few federal laws to be beyond the scope of enumerated powers, especially since the 1930s.

What would have happened if Maryland had won?

States could have taxed federal institutions heavily, potentially crippling them. The federal government would have been much weaker and more dependent on state cooperation. The U.S. might have evolved into a looser confederation rather than a true federal union, and the Civil War might have played out differently.

Is there any modern limit to implied powers?

Yes, but it's narrow. In recent cases like National Federation of Independent Business v. Sebelius (2012), the Court struck down part of the Affordable Care Act as exceeding Congress's powers. However, these victories for federalism limits are rare. The Necessary and Proper Clause remains a broad grant of authority.

Sources

McCulloch v. Maryland, 17 U.S. 316 (1819)—the full opinion, available through the Supreme Court's official records.
Chief Justice John Marshall's reasoning on the Necessary and Proper Clause and federal supremacy is quoted directly from the opinion.