In McCulloch v. Maryland, what did the Court decide about states taxing the federal government?

• A. States cannot tax the federal government.
• B. States may tax the federal government under certain conditions.
• C. States must tax all federal agencies equally.
• D. The question of taxation was left unresolved.

Answer: (A)

The main idea being tested is that federal power is supreme and states cannot use taxation to hinder or control the federal government. In McCulloch v. Maryland, the Court ruled that Maryland could not tax the Bank of the United States because doing so would interfere with federal operations and effectively destroy a federal instrumentality. This decision reinforced the Supremacy Clause, showing that federal law takes precedence over state law. It also affirmed that Congress has implied powers to carry out its enumerated duties, and that allowing a state tax on a federal entity would thwart the national government's functioning. The Court even articulated the principle that the power to tax involves the power to destroy, underscoring why states cannot tax the federal government.