McCulloch v. Maryland

Congress chartered the Second Bank of the United States in 1816. The State of Maryland enacted a law imposing a tax on all banks not chartered by the state, which effectively targeted only the federal bank's Baltimore branch. James McCulloch, the cashier of the Baltimore branch, refused to pay the tax. Maryland sued McCulloch and obtained a judgment in the state courts.

Chief Justice Marshall reasoned that the Constitution derives its authority from the people, not the states, and therefore must be construed broadly. The Necessary and Proper Clause grants Congress the means to execute its enumerated powers, and 'necessary' does not mean absolutely indispensable but rather useful or conducive to the end. Because a bank was a convenient means of exercising Congress's fiscal powers, its creation was constitutional. Regarding the tax, Marshall held that allowing states to tax federal instrumentalities would give them the power to destroy those instrumentalities, which would be incompatible with federal supremacy.

McCulloch dramatically expanded the scope of federal legislative power by establishing that implied powers are a legitimate source of congressional authority. The case provided the constitutional foundation for the enormous growth of federal power over the next two centuries. The anti-commandeering and intergovernmental tax immunity principles that flow from this case continue to shape federalism doctrine.