Taxation, government expenditures, and management of the public debt; creation and regulation of the money supply and banking system.
The U.S. Constitution bestowed extensive monetary powers on the new central government and restricted possible monetary actions by state governments. In 1792 Congress chartered the Bank of the United States, which operated branches in major cities. The bank’s constitutionality was much in dispute, and it closed in 1812 when its charter expired. Monetary disorder attending the War of 1812 led to the chartering of a second Bank of the United States in 1816, intended to aid in managing the government’s finances and also in forcing state banks to restrict their issue of bank notes. Maryland levied a punitive tax against the bank, which was challenged in the landmark Supreme Court case of McCulloch v. Maryland
A severe business depression in 1819 led several states to experiment with methods of increasing the money supply. Missouri created paper near-money in the form of loan certificates that paid interest but were designed to circulate as currency. This practice was struck down by the Court as an unconstitutional issue of bills of credit in Craig v. Missouri
The financial predicament of the federal government during the Civil War
The National Banking Act of 1863 authorized the federal government to charter national banks, which were permitted to issue national banknotes, secured by deposit of government bonds. To induce banks to take national charters, Congress in 1865 levied a punitive tax on state-bank note issues. The tax was upheld as a legitimate act of federal monetary authority in Veazie Bank v. Fenno
Echoes of the greenback cases arose during the Great Depression. In 1933 Congress abolished the gold
The Civil War fiscal crisis led to the first federal income tax, enacted in 1862. It was removed in 1872 but revived in 1894. The Court repeatedly upheld the tax’s constitutionality, especially in Springer v. United States
After McCulloch v. Maryland, numerous cases arose concerning the authority of one level of government to tax instrumentalities and operations of another. Many decisions of this “much litigated and often confused field” are reviewed in United States v. New Mexico
Similarly the Court often upheld the use of federal tax and spending policies to influence state policy. In South Dakota v. Dole
An important issue relating to federal expenditure policy was the Court’s position denying the authority of the president to refuse to spend funds authorized by Congress in the 1975 cases Train v. City of New York and Train v. Campaign Clean Water.
Cohen, William, and Jonathan D. Varat. Constitutional Law: Cases and Materials. Westbury, N.Y.: Foundation Press, 1997. Dunne, Gerald T. Monetary Decisions of the Supreme Court. New Brunswick N.J.: Rutgers University Press, 1960. Ratner, Sidney. American Taxation. New York: W. W. Norton, 1942.
Briscoe v. Bank of the Commonwealth of Kentucky
Craig v. Missouri
Hylton v. United States
Legal Tender Cases
McCulloch v. Maryland
Pollock v. Farmers’ Loan and Trust Co.
Taxing and spending clause