As I was checking my e-mail, the AOL homepage has this news gem:

Pennies May Soon Be a Thing of the Past


Questions for Debate:

1) Is it time for the US Mint to retire the penny?

2) What are the positive and negatives of such a move?

Absolutely. I don't think there's any good answer to the question "Why do we need pennies anymore?"

2) What are the positive and negatives of such a move?

Positive: NO MORE PENNIES!!! There's really no reason to have them anymore. What costs less than a nickel, that we never buy in larger quantities? Just a bunch of useless change that we have to deal with, that clerks have to deal with, and that nobody really wants/needs anymore.

Negative: ok, I give up. What's the catch?

Footnote: I just spent a few months in New Zealand, which also has a dollar based currency. They eliminated the penny a few years ago, and no one there seems to miss it. All the prices for everything stayed just as they were, but change is rounded to the nearest 5 cents. Works just fine. If they can figure this out, why can't we? Does NZ possess some superior intellect that we can't grasp? Is there really some large penny lobby out there? It's just useless change we have to carry around, or that we get more of if we don't. Maybe it's the clothing industry that supports it--do people buy more pants because the pockets keep wearing out carrying pennies around?

There seem to be a lot of reasons to let the good old penny go its way. People just horde the darn things, or throw them away. My only concern seems to be that it will take some time and trouble to make this transition. (At what point do pennies no longer count as legal tender? I suppose they would continue to be used for quite some time, even if the Mint stops making them tomorrow.)

I wonder if it would be possible to make pennies out of something other than the current alloy, so that they will still cost less than a cent to manufacture. That just delays the problem. And I see from the linked article that even nickels may be on the way out!

It's hard to think of major problems with getting rid of these coins, although it will certainly take some thought and effort. Playing the devil's advocate, I can certainly see some possibility that some businesses have a policy of rounding all prices up when they get paid, and rounding all prices down when they pay taxes. For big companies, fractions of a cent can be very important. However, I suppose careful legisaltion could prevent such problems.

Given the propensity of most retailers to charge $2.99, $3.99, and $4.99 because it "looks cheaper" than $3, $4, and $5, I wouldn't be surprised if many of them just move to the .95 ending once the penny is retired, at least as you get more into the $10-20 range.

I remember when this was an issue some years ago, with all sorts of concerns raised, and things that supposedly needed to be addressed. Having seen it in action now, I wonder if this isn't all unneccessary. I really don't think anymore that it would take any time or trouble at all. Just pick a date past which pennies are no longer valid currency, mandate rounding to nearest nickel, and you're done. What would most people or businesses really do differently if the penny were removed today? Not much, other than the rounding, I think.

Keep in mind that the rounding only applies on the total of any transaction, not on each individual item. So, even for gigantic corporations, we're talking at most about 2 cents....hardly even worth talking about, is it? In fact, I am quite sure more time is wasted managing pennies than is gained from having them, so I would think they should be eliminated even if they could be produced for free.

Although this appears to be a no-brainer on the surface, can I ask a dumb question?

If you purchase something with sales tax and the multiplier for sales tax takes it to a number not divisible by 5, if the price is rounded up, does the government get a surplus in sales tax? Would the government allow it to be rounded down?

Call me cynical, but I doubt the government would allow their taxes to be rounded down, thus costing us more in taxes. It doesn't sound like much, but just watch Superman III or Office Space to get an idea of the impact.

What happens currently when the multipier for a sales tax takes it to a number that's a fraction of a cent? The same rules would apply.

As for the impact of whatever increased tax burden that might result, if it would be enough to be oppressive, then certainly the voters are capable of demanding an adjustment to the tax rate. Even in Massachusetts, at least one prominent Democrat running for governor (Tom Reilly) is calling for a reduction in the state income tax rate. If a move like this makes it politically easier for state politicians to cut income taxes, then I'd consider it a net plus overall.

1) Is it time for the US Mint to retire the penny?

2) What are the positive and negatives of such a move?

Yes, the penny should be retired if it costs more to make than the face value. Either that, or it should be made from cheaper metals that would cost less than a cent.

I don't think it would hurt to redesignate the current penny as a two cent piece, and ameliorate the scale of the change (pun intended) needed. America doesn't have 2 as a denomination, which increases the demand for pennies currently. Use the same size coins, made of the same metals, but redesignate their value to two cents.

Then the rounding effect is even smaller than doing away with the coins altogether, and the coins already in circulation don't have to be melted down (which, given the number in circulation, isn't very environmentally-friendly anyway).

2) What are the positive and negatives of such a move?

I don't have strong preferences on this subject, but I can think of one negative.

In Texas we rely heavily on the regressive sales tax. Local government's also use sales taxes. In Fort Worth, the rate is 8.25%. A book costing $15.95 would come to $17.27 after tax. If the penny were abolished, the state would probably use some rounding mechanism to the nearest nickel.

This is pretty easy. Just stop making coins that cost more to make than their face values. Eventually, the coins will go away. Collectors will hoard, the investment values will rise, and so what? Meanwhile, use plastic for transactions or check/debit cards. Keep the cent value in transactions, just not coinage.

But what about cash transactions? Well, if you care about unfair rounding to favor the government, then don't use cash. Otherwise take the maximum four-cent hit. Retailers might make everyone feel better by posting prices guaranteed to hit the nickle demarcation with tax. It might start a trend in truthful advertizing.

Heh, gas pump prices would drop the .9 of a cent.

An alternative is to make pennies out of hard plastic. You know, play money? What's the magic of copper-plated zinc? Could even use the plastics based on organics, thus no further demand for petroleum.

I suppose conterfeit pennies might get into circulation. Maybe enough of them would bring our economy down.

Nawwwww.

There are three ways the government could round sales taxes:

1. Up to the nearest nickel
2. Down to the nearest nickel
3. Up or down from a mid point

I'll bet the Texas legislature selects option 1 and rounds up. Why not make a regressive tax, like the sales tax, slightly more regressive? Option 1 would bring more money into state and local treasuries. That's fine if they spend it wisely, but that's a big if.

I say get rid of the penny. It's by far the lamest of the coins and the most inconvenient. I spent some time in Australia and they've gotten rid of their penny too; so everything is in increments of 5 cents. I think the way to solve the tax problem is to add tax before hand so the cost you see is what you pay. So the 8.25% tax would come out to $21.15 making the item worth $19.54. This would make everything easier and we'd still be able to keep taxes the same. The only problem would be that distributors would have to change their price and maybe do some rounding.

1) Is it time for the US Mint to retire the penny?

I don't think so.

Taxes are the main argument against this, as other have brought up. You can't very well have a percentage tax if you don't have 1 cent increments to collect it with.

The US government rounds federal taxes to the nearest dollar. It can be argued that they don't want the pennies, I guess.

2) What are the positive and negatives of such a move?

Negatives would be taxes and removing Lincoln from a coin. Then we'd have to find another coin to put Lincoln on...what a pain.

A few years ago, I recall that Italy had 10 lira coins. 10 lira was about half a cent, if I recall correctly (exchange rate was about 2000 lira per dollar). They've gone to Euros, so that is a thing of the past. But I'm sure that the dimelike 10 lira coin cost more than 0.005 dollars to mint!

Euros are minted in 1 cent and 2 cent increments (a two cent coin!!). So the Europeans seem to think that a 1% of a monetary unit is needed.

Sure you can...we deal with this all the time. What do we do currently when amounts are not exactly in 1 cent increments? We round. Take the penny away, and the same process applies. Do taxes currently always come out to whole penny increments? NO! What do we do then? We round. I really fail to see why this is even an issue worth discussing, as it is nothing more than a continuation of the current process, just with one less useless coin in the mix.

This same argument applies to the other tax issues being raised here. I think we are making a large mountain out of something that can can't even really aspire to become a molehill. It is quite simply solved by using normal rounding procedure (1 and 2 cents, round down, 3 or 4, round up). Again, NZ has figured this out...is there some large intelligence deficit between here and there?

Side note: I purchased some lunch today, and the amount came out to $5.02. I didn't have any change with me, so the clerk had to count out four dollars and 98 cents worth of change. What a waste of time! I did have some pennies in the car...but going out to get them would also have been a waste of time. This is the real issue. Even if pennies were free to make, they still aren't worth it. Mention has been made here of the value of rounding, applied many times over, to the government. What about the value of our time, applied many times over, spent dealing with this useless currency? When was the last time anyone here bought anything for 1 penny? Anyone? Quite simply, we don't need it, and having it wastes time. Apparently, given the cost of manufacturing, it also currently wastes money. All to gain what? Can anyone here point to any significant benefit of continuing to use pennies?



Apparently this special intelligence gene only occurs in the South Pacific, then.

For those that disagree, why isn't there a large push to start producing 1/10 cent coins? All of the arguments being used here in favor of pennies would apply to that as well. The likely answer would be that no one wants to mess around with 1/10 cent coins. The point being that at some point you have to decide which denominations are worth using. As inflation inexplorably devalues money, the value of the lowest denomination will continually decrease, until it is no longer worth dealing with. We have reached that point with the penny (I would argue, in fact, that we reached that point some time ago). If we stopped using pennies tomorrow, would anybody here really miss it? I certainly wouldn't, and I really don't think anyone else would either. At some point, this will inevitably happen, and I guarentee that when it does, almost everyone will wonder why on earth we didn't do this a long time ago.

Come on, Hobbes. The same question can be asked in reverse...

Why not eliminate pennies and nickles? Or pennies and nickles and dimes?

I agree that at some point you need to decide which denominations are worth using. There used to be a ha'penny: half a cent. It's gone now. Eventually the penny will be gone, but it still has its uses.

Imagine the laws that would need to be created to change this: sales taxes would need to be revised (many are in 1/4 percent increments), rounding rules would need to be implemented, prices would change (want to guess which way?).

Some businesses only make a few percentage points of margin: grocery stores and gas stations come to mind. This change could literally cost them that precious bit of margin that they stay in business with. I've contemplated starting a topic on this concept: [Does the 2-3% service fee on credit cards lead to an increase in all prices? Is the convenience of credit cards worth a 2-3% permanent inflation?]

A few percent means a lot, despite the fact that you feel you are "wasting your time". Why not just tell the cashier to keep the change??

That's just it...I don't see where anything would need to be changed, other than stipulating rounding rules, which shouldn't take more than 1 sentence in any legislation. No change is needed in sales tax, no changes in prices. All transactions are calculated exactly the same way they are today, using all the same rules and taxes. The only thing that would change is that any cash transaction would be rounded to the nearest nickel. Simple. Just like all amounts today are rounded to the nearest cent--sales tax certainly ends up in some decimal increment in almost all transactions. The ONLY thing that would really change is that we wouldn't have to bother with pennies anymore. I still fail to see where this large pro-penny lobby is coming from.



This is the part I think there is confusion about. There is no 'few percent'. On some transactions, you will gain a couple cents, on others you will lose it (and ONLY on cash transactions). The net effect is nil. That's why it's irritating to me that we're wasting our time for it--there is no net benefit we receive, unless there's some hidden need for carrying excess ballast in our pockets that I'm unaware of.


I almost always do do that. The problem comes from some businesses not reciprocating (although many, in my experience, now do).

So, to me, there's no benefit gained from using pennies, there's no transactions that require them (no one has yet responded with someone they've recently purchased for a penny), and it would cost almost nothing to stop using them. I still don't see what the issues are with eliminating it.

It isn't "pro-penny" it is pro status quo. Why change if there is no demonstrable benefit.

I rarely use cash to buy anything except beer at bars . I don't see pennies all that often. So this whole "Waste of time" hasn't wasted any of my time.

But to change would require a few things. First would be training of cashiers on rounding policies. Maybe it doesn't seem that big of a deal to you (or to me, personally) but many cashiers are "math challenged". I remember way back in the day when I worked fast food and the policy was using the cash register to compute change. If a customer gave me 5 bucks for a $4.92 bill, I was forced to punch in $5, CASH, and have the register tell me that the change was 8 cents. Why? Because most cashiers are ... well, let's leave it that they are cashiers for a reason.

Second would be laws. If you think passing a simple law is easy to do, you should visit your local government, then the state government, then the federal government and see how complicated such a simple thing can be.

Then there's the cost of rounding up all those rogue pennies. We can't exactly welsh on the "Full faith and credit" we gave people that believed that pennies were worth something, can we? It would cost millions (if not more) to recover all that useless metal.

Your example of needing $4.98 in change is one extreme. What if your bill was $5.03 instead of $5.02? Even with your proposal, the cashier would still need to count out $4.95. Not exactly an increased degree of difficulty over $4.98. And if your bill was $4.99? An extra dip into the cash tray, whoopee! Your example is valid in only 5% of transactions (those that are one or two cents over a dollar or one to three cents under). All other transactions require some amount of change and your proposal only eliminates one extra dip into the till.

Let's face it, you want to change the law to advance your personal sense of laziness. You want the government to make things easier for you. Not exactly an enumerated power.

I think we can demonetize the penny. Yes, it would require rounding and legislation regarding rounding, but isn't that better than continuing to pay to mint the penny.

Yes, prices would change, but in some cases they would actually go down. Right now, we have car prices ending in .99. Why? It's a psychological thing. $29,999.99, for some reason, seems significantly less than $30000.00. Merchandisers would more than likely change the price to $29,999.95 in order to retain that psychological effect.

In terms of percents, nothing needs to be rounded until a payout occurs. Currently you accrue interest at a percentage rate and when it comes time to pay it out, it is rounded. Just because we don't make the coin doesn't mean that percentages have to be changed to accomodate it.

It most certainly has wasted my time. I take the bus or any form of public transportation... they don't take pennies. I use a vending machine... they don't take pennies. I end up with a huge pile of pennies in my pocket. The penny is probably the most discarded coin around. And now, being that it actually costs more to make it than its worth, its time to get rid of it.

OK...that argument I get. My answer would be that there is demonstrable benefit (not having to deal with fairly useless coinage), but that like most qualitative things this might be hard to quantify. Naturally, I could counter with the question "Why continue to mint and use coins that have no useful purpose anymore?". I guess that also goes to the demonstrable benefit...we wouldn't be wasting taxpayer money printing coins nobody wants or needs. Also (see below), we would be saving $11 billion annually if we stopped minting them.



Agree that some are 'math-challenged', but this doesn't make that any worse. Further, if an error is made, it is at most 2 cents. Also, I think the 'math-challenged' would find it easier to count nickels than pennies. Finally, if they are not up to the job, then they shouldn't be doing it in the first place. Do we really want someone we can't round to the nearest nickel handling cash transactions for a company?



Yes, this is true. This is probably the greatest 'status quo' argument. This should be very, very simple legislation to pass, requiring no more than a paragraph or two in some other bill. But of course that's never the case. But this is a problem with any legislation, and so is really outside the scope of this discussion. I would add that this is why discussing such matters is usually outside the scope of organized debate...as it would lend excess credence to the status quo position on any matter. That being said, consider:




Now, if it takes 1.2 cents to make each penny, that's about $11 billion annually spent producing them. Suffice it to say that putting through legislation to phase them out would be considerably cheaper than that. Further, I think that almost everyone here could agree that there's a whole bunch of things that $11 billion could be better spent on.

Further, from the same article,


Again, I think that this is an issue for which any perceived drawbacks are being enormously overblown. There really aren't any. Amlord, I know you are a fiscal conservative, and you've admitted you seldom use pennies yourself. Shouldn't we save the $11 billion/yr, and make things easier on ourselves to boot? In fact, I suspect (and the above provides good evidence for) that we should also seriously consider eliminating the nickel at the same time.



First, I'd like to point out that you have just called the penny useless (if the metal is useless, and the penny is worth less than the metal and has no other benefit (which it doesn't), then it must also be useless, or actually less than useless). That aside....

I'd be interested to see what the solution to this was in Australia and New Zealand. Unless anyone were will admit they simply possess greater intellectual capabilities than us and the solution is beyond us, clearly this was a solvable problem. However, I would think simply stipulate a date past which the penny is no longer valid currency. It is then up to whoever has them to turn them in if they so desire. They could then be melted down--remember the metal is worth more than they are. Finally, even if it did cost millions to recover them, we're saving billions from not having to mint them, so the cost argument is strongly in favor of ceasing production of them, not continuing it.



No, I want the government to stop making things unnecessarily harder. You seem to be in the position of arguing that we should continue to spend billions of dollars per year to continue to mint coins that no one needs. Laziness or not, I'll take my side in that debate. As I said previously, inflation dictates that eventually the penny will be eliminated. When it is, I am positive that we'll all wonder why it took so long to do. Why waste $11 billion a year until then? Or, perhaps more to the point, can anyone here come up with $11 billion in annual benefits we receive from minting pennies?

I don't want to quibble, but first off, it won't save $11 billion. By my calculations it is at most $18 million (not a small amount). The pennies are worth 0.01 dollars each, so 9 billion of them are worth $90 million (the government does not give them away, they "sell" them to banks, so the pennies retain value). The cost of minted them is (9 billion) x (1.2 cents) x (1 dollar / 100 cents) $108 million. 108-90=18 million dollars.

We should at least keep the numbers straight.

So we do have that the use of the penny is costing the United States approximated 0.00015% of its GDP (taking it to be 12 trillion USD). Crisis time.

I agree with you that the penny will eventually be eliminated. Not today, however. The likely effect is an increase of at least 1cent in all prices. In some goods, this is more than a 1% increase. In others, it is much, much less (such as entspeak's car example).

I guarantee you that the law changes needed to do this will amount to more than $18 million and ridding ourselves of the penny doesn't seem to be worth raising the cost of goods by some percentage.

What...let a little thing like the correct numbers reduce my argument?

The missing two decimal places aside, I would still argue that it is $108 million that is being wasted, as there is no benefit gained from anybody in using them, and it costs $108 million to make them. Consider that banks still need to be profitable, and will pass their costs on to the consumer (us). If that isn't sufficient incentive, then by all means let's throw nickels into the equation as well, as they are pretty much equally useless. Dimes are probably questionable, but getting rid of them would leave only quarters, raising the question about having coins at all...which seems a little bit more than we need to discuss here.

Using the percentage of GDP argument, one could justify practically anything. For example, were the government to give me $1 million annually, it would only be 1/18 of the amount you have already stated is completely trivial, so why not do that? (then I could hire someone to handle the pennies for me, and we'd both be good! ) This is in fact the line of reasoning that has created our bloated budget to begin with....you're not becoming fiscally liberal on us now, are you Amlord? Regardless of the savings, if the cost is providing no benefit, shouldn't we eliminate it? Consider this....doing so might actually get the government to start having to justify their expenditures...leading to a potential savings of trillions of dollars. So, let's put a banner above this strawman that states "You're not going to let a few pennies keep you from saving trillions of dollars, are you?"

I still disagree that any prices need to be changed at all. Note that prices did not change in New Zealand (not completely sure about Australia, although flight prices from Qantas didn't end in nickels, so I suspect the same is true there).



First, the law changes would be one time, whereas the savings would be an annuity...so costs are certainly on the side of eliminating the penny. I also still disagree that goods costs would change at all. If anything, they'd probably go down. Consider that prices currently end in .99 for marketing reasons. Raising those up to the nearest dollar would defeat the marketing purpose, therefore if they change at all they'd go down to .95. So, now we also having savings on the cost of goods side, in addition to governmental savings, and time savings (for both retailers and customers) in not having to deal with pennies. That seems to just leave us with the mysterious pocket ballast argument, for which I haven't seen any strong evidence.

The increased cost of goods will all come out in the wash one way or another; what goes around comes around, that's just the way a market economy works. But the costs involved in maintaining the penny are wasted labor and resources.