Commentary by Jon Roland

This case can be considered one of the first major departures from strict 
Jeffersonian construction of the Constitution, and it laid the basis for a 
long train of further departures that continues to plague constitutional 
jurisprudence to this day. However, it is also an example of how bad cases 
badly argued produce bad precedents. Although we might consider CJ Marshall 
to have wrongly decided the case, a large part of the problem is that 
neither side argued competently in support of a correct interpretation of 
the Constitution. 

First, governments can but usually do not create corporations. Their 
incorporators do, although a government or another corporation can in 
principle be an incorporator like any individual. And the limited liability 
of their shareholders arises from public notice that they are dealing with a 
limited liability corporation, which public notice is delivered by calling 
themselves a "corporation" or some name with the same meaning. What a 
government does is grant a monopoly for the use of the name of the 
corporation, which would otherwise have to identify itself in ways that 
could distinguish it from other corporations with the same name, as by 
specifying the incorporators, date and place of incorporation, etc. (Yes, I 
know this doctrine flies in the face of much jurisprudence, but that 
conflicting jurisprudence is wrong.)

As to whether the federal government had and has the power to incorporate a 
bank or other corporation, I would say that it does -- on federal territory 
to which Congress has been ceded exclusive jurisdiction under I.8.17. That 
is, some group of persons could incorporate a bank on such territory and the 
federal government, being the only government available, could grant a 
monopoly on the use of the name.

But the federal government did not and does not have the power to create a 
private monopoly, or to empower a private organization to act as a federal 
agency. Executive power must be delegated only to individuals under a chain 
of command that culminates in the presidency. In other words, they must be 
public employees, executing federal laws. Not a bank performing banking 
functions. 

So a bank could be incorporated in the District of Columbia, but it could 
not be granted monopoly powers, or the status of a federal agency. Could it 
open branches in other states? Yes, if banks incorporated in one state could 
open branches in other states, then so could a bank incorporated in the 
District of Columbia.

Now to the issue of the case. Could the State of Maryland tax the bank 
incorporated in the District of Columbia? Yes, but only on the same basis as 
it could tax any bank incorporated in Maryland or in another state. Equal 
protection of the laws. No state taxation of interstate commerce.

So CJ Marshall got it mostly wrong in his opinion, but the State of Maryland 
was wrong, too. The proper decision was to reduce the tax on the bank to the 
same rate it would have been if it had been incorporated in Maryland, 
applied only to its assets and operations within Maryland, and to refund to 
the bank any taxes paid in excess of that. Maryland demanded it all, and got 
nothing, and in doing so created a terrible precedent.

Now to another question. Whether a power delegated to government has as 
necessary and proper implied powers the power to impose penalties for 
violations. The answer is that in the absence of a specific delegation of 
criminal powers, that is, the powers to disable the rights of life, limb, or 
liberty, the only powers that are implied to enforce a power are civil, that 
is disablement of the right to property. In other words, it might impose 
fines, and confiscate property to pay them, but not throw anyone in prison, 
or flog them, or hang them. Civil and criminal penalties are distinct 
powers, and the one cannot be inferred from the other.

So the only powers to disable life, limb, or liberty for offenses against 
its law on state territory were for (1) counterfeiting [I:8:6], (1) treason 
[III:3:2], (3) piracy and felonies on the high seas [I:8:10], and (4) 
offenses against the laws of nations [I:8:10], (These last two are sometimes 
combined into one, but they are distinct.) and (5) violation of lawful 
military or militia orders, including the call-up [I:8:14]. Subsequent 
amendments have added a few subjects: (6) enslavement [Amd. 13], (7) 
violation of civil rights by a state agent [Amd. 14], (8) abridgement of 
someone's right to vote based on race, color, or previous servitude [Amd. 
15], (9) abridgement of someone's right to vote based on sex [Amd. 19], (10) 
abridgement of someone's right to vote based on nonpayment of a tax [Amd. 
24], and (11) abridgement of someone's right to vote based on his or her age 
if he or she is age 18 or over [Amd. 26]. 

That still leaves federal territory under I.8.17, where the federal 
government has broad police powers, similar to those of a state, although as 
in a state, not unlimited powers. It also has broad powers under IV.3 to 
organize a (non-state-ceded) territory, but not to exercise police powers 
there. That is, it can create jurisdictions which can then make their own 
laws, but the powers thus exercised would derive from the people of those 
jurisdictions, not from Congress. (Yes, I know this is also against 
established jurisprudence, but once again, established jurisprudence is 
wrong on a great many matters.)

So does the federal government have the power to impose criminal penalties 
for, say, perjury or obstruction of justice on state territory? Only if it 
is essential to prosecution for violation of a violation of a statute 
authorized under one of the delegated penal powers above. In other words, 
one could be prosecuted for perjury in connection with a violation for 
counterfeiting, but not in connection with some other violation which was 
not itself punishable with a criminal penalty, such as a firearms violation.

And CJ Marshall was clearly wrong about the federal government being supreme 
within its "sphere of action". The Constitution does not contain delegations 
of spheres of action. It contain delegations of powers, and powers that are 
limited even within their spheres of action, as well as prohibited outside 
of them.


