Dollars & Sense: Is it Time to Retire the U.S. Penny?
The U.S. penny has been around since 1793, when it was as large as a half dollar. But in recent decades, many, including some lawmakers, have called for the country to get rid of the penny. While there are some good reasons to consider taking pennies out of circulation, there are also reasons people believe they should stay.
Whether you've put some thought into the debate already or it's the first time you're hearing about it, here's what you need to know.
Are Pennies Necessary? Reasons Why We Should Eliminate Them
The penny has been around since the late 18th century, but in the past 30 years or so, many have wondered why we still need it.
Some legislators, including Representative Jim Kolbe and Senator John McCain, have called for the U.S. Mint to cease production on the one-cent piece, if only for a period of time, to study whether or not we need them.
Others, including the Coin Coalition and lobby group Citizens to Retire the Penny, have called on legislators to make the move. But should we get rid of the penny? Here are just a few of their reasons why the one-cent piece should be on the chopping block:
- They cost too much to make: It cost 1.76 cents to produce a penny in 2020, according to the U.S. Mint's biennial report to Congress. That's more than they're worth, which means the government is losing money with each coin.
- Pennies aren't worth much anymore: In the past, the value of a penny could go a relatively long way. In 1913, one penny could purchase what you can get for $0.28 today based on the Consumer Price Index.
- Zinc toxicity: Pennies are made from copper and zinc. Not only is zinc toxic to children and pets if ingested, but its mining also has a negative impact on the environment.
- Historical precedent: Other countries, including Australia, Canada, Finland, New Zealand and many others, have already gotten rid of their one-cent pieces. By making the move, the U.S. wouldn't be in uncharted territory.
- Limited utility: Consumers can't use pennies in vending machines, kiosks or most toll booths. Additionally, retailers could easily round prices to the nearest five cents and save time at the cashier.
- It's already been done: The Army and Air Force have already eliminated the use of the penny on their overseas bases.
Why Do We Need Pennies? Here Are Some Arguments in Support
Despite the several benefits of getting rid of the penny, there are also a few reasons to hold onto them:
- Public support: The public overwhelmingly supports keeping pennies in circulation. In a poll conducted by Americans for Common Cents, more than two-thirds of respondents want to keep the penny. That includes 72% of Americans making under $50,000 annually and 74% of Americans who earn between $50,000 and $100,000.
- It could increase prices: Some penny advocates argue that retailers would round all transactions up to the nearest five cents instead of up or down based on the price. This could lead to what's been called the "rounding tax," which could disproportionately impact low-income families.
- Charities rely on them: Many charitable organizations rely on "penny drives" to encourage small donations.
- Historical significance: Although Abraham Lincoln is featured on both the penny and the $5 bill, some penny proponents argue that getting rid of the one-cent piece would dishonor the revered president's legacy.
Should We Get Rid of the Penny?
Currently, it's unlikely that the U.S. government will get rid of the penny anytime soon. While there have been bills introduced to that effect — the latest of which came from Senators John McCain and Mike Enzi in 2017 — there has been little interest by Congress to seriously consider the measure.
Some businesses have tried to eliminate pennies on their own, albeit with no luck. In 2012, for instance, Chipotle attempted to round bills to the nearest nickel in some of its restaurants but stopped after customers complained about being charged more than they were expecting.
As to the question of whether or not we should remove the penny from circulation, consumers can review the advantages and disadvantages and make their own judgments.
Making a "Change" in the U.S. Coin Shortage
According to the Federal Reserve, while U.S. coin supply has improved since the coin shortage that began in 2020, some small businesses are still having difficulty getting the amount of change they need to operate. Fortunately, taking steps to help is simple. If you have spare change at home, for example, a coin jar, bring it to your local bank to exchange it for bills. SouthEast Bank converts coins to cash for free, then reintroduces those coins back into circulation to support organizations that need them. Learn more here.
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Information contained in this blog is for educational and informational purposes only. Nothing contained in this blog should be construed as legal or tax advice. An attorney or tax advisor should be consulted for advice on specific issues.