In McCulloch v. Maryland (1819), the Supreme Court ruled that

• A. states could form banks and tax them.
• B. the national government's power was dependent on the states.
• C. the national government could charter banks and the states could not tax those banks.
• D. Congress erred when it created a national banking system.

Answer: (C)

Federal supremacy and implied powers are being tested. The Court said Congress can charter a national bank as part of carrying out its constitutional duties, even though a bank isn’t explicitly listed in the Constitution, because the Necessary and Proper Clause allows Congress to take actions needed to execute its enumerated powers. Maryland’s attempt to tax the bank would put the states in a position to obstruct federal operations, which the Supremacy Clause rejects. Chief Justice Marshall summarized the idea that the power to tax involves the power to destroy, so allowing a state to tax the bank would destroy a federal instrument.

So, the national government could charter banks and the states could not tax those banks. This decision reinforces federal authority over state action and endorses a broad reading of Congress’s implied powers.