McCulloch v. Maryland was a landmark legal case in which the United States Supreme Court invoked the "necessary and proper" clause of the Constitution to support the conclusion that the federal government's power extends beyond the powers specifically listed in the Constitution. The case also affirmed the concept that individual states cannot pass laws that impede the federal government from exercising its constitutional powers.
In 1819, the United States faced a serious economy crisis known as the Panic of 1819. The crisis partially resulted from the Bank of the United States, as well as state and local banks, extending credit to too many people. These people primarily used the loans to purchase federal land in the American West. As the economic downturn worsened, the Bank of the United States continued to demand repayment for loans. The various banks' actions resulted in the Banking Crisis of 1819.
Because of the National Bank's actions, money became scarce, making it even more difficult for people to pay their debts. Several states, including Maryland and Ohio, implemented taxes on the Bank of the United States. These states hoped that, by taxing the banks, money would then enter the grasp of state governments. The state governments could then make loans to their citizens, thus relieving the money shortage.
In 1819, the case of McCulloch v. Maryland reached the United States Supreme Court. Maryland had created a tax on the National Bank's branch in Baltimore, Maryland. Although the federal government had the power to tax state and private banks, the federal government contended that states could not tax the Bank of the United States. The Supreme Court agreed with the federal government's position, contending that the federal government and its institutions were superior to the state governments. Chief Justice John Marshall believed that "The power to tax is the power to destroy." In other words, if the states could tax the federal government, the states had the power to destroy the federal government.