McCulloch v. Maryland (1819) is one of the most important Supreme Court cases regarding federal power. In a unanimous decision, the Court established that Congress had implied constitutional power to create a national bank and that individual states could not tax a federally chartered bank. The Court stated Congress was authorized to pass laws "necessary and proper" in order to carry out its duties.

Controversy still lingered about how strong the national government should be, even after the Constitution was ratified. Alexander Hamilton, the nation's first treasury secretary, argued a national bank was necessary to fund national infrastructure projects. In 1791, President George Washington obliged and created the first Bank of the United States, headquartered in Philadelphia.

In 1816, the second Bank of the United States was created and had branches in a number of cities, including Baltimore. In 1818, Maryland's legislature passed a bill taxing out-of-state banks operating in the state. The law specifically targeted the Bank of the United States, since it was the only such bank operating in Maryland. James W. McCulloch, the head cashier at branch in Baltimore, refused to pay $15,000 in owed taxes, claiming Maryland's government didn't have the right to tax a federally chartered bank. Maryland's leaders sued and the state's courts sided with the legislators. Unhappy, McCulloch's lawyers appealed the case to the Supreme Court, where the Justices ruled in favor of Congress. Chief Justice John Marshall wrote that Congress had the right to establish a bank under the Constitution's necessary and proper clause, and that states lacked the authority to tax a federally chartered institution.

Explainers