The Supreme Court upheld Congress’s right to tax bank notes issued by a state-chartered bank.

In an effort to build revenue to finance the Civil War, in 1866 Congress passed an act that raised the tax on state bank notes from 1 percent to 10 percent. The Veazie Bank of Maine declined to pay the higher tax, arguing that it was an unconstitutional use of Congress’s power to tax because it was a direct tax and levied on a state agency. The Supreme Court, by a 7-2 vote, followed Hylton v. United States[case]Hylton v. United States[Hylton v. United States] (1796) and found that a tax on bank notes was not a direct tax in contravention of the Constitution and that the bank though chartered by Maine was not a state “instrumentality.” It upheld Congress’s power to levy such a tax, and Veazie Bank was required to pay. Chief Justice Salmon P. ChaseChase, Salmon P.;Veazie Bank v. Fenno[Veazie Bank v. Fenno] wrote the opinion for the Court, and Justices Samuel Nelson and David Davis dissented.Taxation;Veazie Bank v. Fenno[Veazie Bank v. Fenno]

Hayburn’s Case

Hylton v. United States

Judicial review

Marbury v. Madison

States’ rights and state sovereignty

Tax immunities