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The case centered on Article IV's National Supremacy Clause and the Necessary and Proper Clause, Article I, Section 8. Was the Bank of the United States a necessary and proper exercise of powers granted by the Constitution or was the bank unconstitutional? Did the National Supremacy Clause prohibit State taxes on federal activities or was the Maryland tax law constitutional? Was the Maryland tax on only federally chartered banks a discriminatory action, antagonistic to the federal system?
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For McCulloch: The creation of a national bank had been fully debated in Congress as a means for conducting the financial operations of the nation, and Congress had deemed its establishment necessary and proper. Moreover, minute details of national operations cannot be specified in a document like the Constitution, which provides only a framework. As such, many legitimate powers of government are implied by, rather than stated, in the Constitution. The bank was a legitimate federal function with which no State may interfere. The Maryland tax on the national bank, therefore, was unconstitutional.
For Maryland: As a sovereign State, Maryland was vested by its people with all authority to regulate business and to tax institutions inside its borders. The regulation of banks was long accepted as a necessary means to prevent financial abuses. Since the Federal Government had created a number of statutes to regulate State banks, what should prevent Maryland from regulating federal banks? Furthermore, since no authority to charter a federal bank is included in the Constitution, the Bank of the United States was, the State argued, unconstitutional.
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Speaking for a unanimous (7-0) Court, Chief Justice Marshall rejected the Maryland argument. The decision centered on Maryland's claim that because the Constitution was ratified by State conventions, the States were sovereign. Marshall refuted this claim, saying that the Constitution was the instrument of the people, not the States. Therefore, the Court asserted the supremacy of the Federal Constitution over the States. The Court also emphasized the importance of national supremacy. Marshall stated that
the Government of the Union, though limited in its powers, is supreme within its sphere of action
.
The Court also rejected Maryland's argument that the Constitution did not explicitly allow for a national bank. Marshall's argument rested on this simple point:
we must never forget that it is a
constitution we are expounding. In other words, the Constitution was meant to be an outline of basic ideas, easily understood by the general public, and open to interpretation. Marshall went on to argue that while the powers of government are limited, the necessary and proper clause was meant to enlarge the ability of Congress to carry out its enumerated powers. He wrote: 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, are constitutional
Turning to Maryland's action in imposing the tax, he observed that
the power to tax involves the power to destroy
, and on that basis, the Court ruled that Maryland did not have the power to destroy a duly constituted institution of the Federal Government.