StanCollender'sCapitalGainsandGames Washington, Wall Street and Everything in Between

Four More Reasons The U.S. Won't Get Rid Of The Penny Anytime Soon

01 Apr 2012
Posted by Stan Collender

In case you didn't hear about it, the Canadian government last week decided to stop minting new pennies. The government says it will save $11 million a year by not manufacturing any more of the coins and instead having businesses round prices to the nearest five cents.

This story by Karen Weise in Bloomberg Businessweek explains some, but not all, of the reasons the U.S. won't soon follow the Canadians and do away with its own penny even though the budget savings would be considerably greater. Some additional things to consider:

  1. Dollar bill supporters -- especially those who sell the paper to the government on which the bills are printed -- will look at a successful penny elimination as a precursor to the elimination of the $1 greenback. Keeping the penny, therefore, will be part of their strategy to convince Americans that there should be no change in their change.
  2. Abraham Lincoln is on the penny, Lincoln was from Illinois, and Illinois is a critically important state in U.S. elections. Neither political party will want to be blamed for what many in the state will consider massive disrespect.
  3. Does anyone seriously think that former Illinois Senator Barack Obama will allow anyone to disrespect Lincoln?
  4. There will be too much outcry about the possibility of businesses always rounding up instead of rounding to the closest five cents. That will make the decision to eliminate the penny appear to be anti-consumer.

In other words, like almost everything having to do with federal budget these days, even if they're there for the taking, the politics of the issue make it all-but- impossible for the savings to be realized.

And while we're at it, we

And while we're at it, we SHOULD be getting rid of the nickel. It isn't worth much and that would enable us to evenly lop off an entire digit from prices.

If we get rid of the nickel,

If we get rid of the nickel, we would have to get rid of the quarter as well. That would be a nuisance. So we should keep the nickel, but permit the mint to change its metallic content. When most machines stop taking quarters, then consider moving a decimal.

Why the penny is here to stay

Short reason: allergy to tax increases


Like the old mil pennies are used to pay retail sales taxes. Retailers will be required to round up because to do otherwise would require them to pay sales taxes from their own pockets.

Theoretically, it would be possible for state and local governments to change their laws so that retail sales taxes were even multiples of nickels. Many state and local governments are in severe fiscal straits so I wouldn't expect them to lower their taxes. There will be an outcry about the increased taxes.

BTW, the costs of the change (which won't be minor) should be considered in any accounting of the benefis of eliminating the penny.

Rounding up or down is not an

Rounding up or down is not an issue... if it weren't for sales taxes. Retailers would be perfectly happy pricing in increments of 5 or 10 cents, but you can't make all that work out when you have taxes set at amounts like 7.25 percent. So this is purely a government self-imposed problem.

The only other thing that still requires pennies is postage set at odd amounts rather than increments of 5 cents. Again, totally a government issue.


It's nonsense to say that the sales taxes make rounding impossible. Sales taxes are already rounded to the nearest penny. (And the need for rounding has nothing to do with numbers like 7.25%. Even if you had a nice even 5% or 10% sales tax rounding would be required.) There is nothing sacred about this level of rounding.

Even if you don't round to the nearest nickel, stores could round the sale total to the nearest nickel for cash sales, and round to the nearest nickel for cash sales. The gain or loss for consumers or stores would be miniscule for most stores. Even if stores always rounded down to maintain customer goodwill, they'd only be losing zero to four cents per sale. That's a small fraction of what they pay now on credit card transaction. When you consider the time savings in not having to deal with the pennies they would come out ahead.

Financially, getting rid of pennies would be a win for almost everyone. (Collectors, mint employees, and metal producers would be possible exceptions).

Without the penny, Canadian

Without the penny, Canadian store customers will move through long lineups quicker, which means the store may have the capacity to sell more. Productivity gains will be much higher than what the government mint saves.

Did Everyone Forget About the Zinc Industry?

The Zinc industry would be significantly hurt if the penny were no longer minted, since it's now 97.5% zinc.


There are many penny drives that help people in need.

Recent comments


Order from Amazon


Creative Commons LicenseThe content of is licensed under a Creative Commons Attribution-Noncommercial-Share Alike 3.0 United States License. Need permissions beyond the scope of this license? Please submit a request here.