The Supreme Court case that defined the scope of the federal legislative power and the federal government’s relationship with state government authority. (Read the opinion here).
The United States Congress incorporated a federal Bank of the United States through a legislative act. The State of Maryland imposed a tax on any bank operating within the state that did not possess a state charter. The state obtained a judgment against McCulloch, the cashier of the Baltimore branch of the Second Bank of the United States, for issuing bank notes without paying the required tax. The Supreme Court reversed, holding for McCulloch.
In an opinion by Chief Justice John Marshall, the Supreme Court held that first, Congress had the authority to create the Bank of the United States. Second, the Bank of the United States had the right to establish branches within the states, and the states did not have the power to tax or otherwise interfere with any constitutional means by which the federal government exercised its authority. Although the Constitution did not specifically enumerate the authority of Congress to establish a federal bank, Congress nonetheless had the implied power to do so. Because the government had the powers of the sword and the purse, it must have ample means to execute those powers. The Necessary and Proper Clause of the Constitution (Article I, § 8) enabled Congress to pass all laws to effectively pursue its specified ends: “Let the end be legitimate, let it be within the scope of the Constitution, and all means which are appropriate, which are plainly adapted to that end, which are not prohibited, but consist with the letter and spirit of the constitution….” Thus, Congress had wide discretion to make policy decisions so long as those decisions were plainly adapted to a constitutionally authorized end, and the Court would defer to Congress in these cases.