The debate over whether the US should stop using pennies has been ongoing. Some argue that they are necessary for transactions, while others suggest rounding prices to the nearest nickel. The cost of producing pennies is higher than their value, and bills have been introduced to stop production. Arguments against pennies include extra processing costs and time, and lack of vending machines that accept them. Other countries have phased out their lowest value currencies with little effect on their economies, and it may be time for the US to consider doing the same.
The debate over whether or not the United States should stop using pennies has been raging for years. Defenders of the penny argue that as long as sales taxes and retail prices continue to be expressed in cents, consumers shouldn’t stop using pennies in transactions. Some opponents of the penny suggest that retail prices and taxes should be rounded up or down to the nearest nickel, thus eliminating the need for pennies as currency. However, this is only the opening salvo of the Great Penny Debate.
Some say the US should stop using cents because the cost of producing the coin is now higher than the value of the coin. Even the United States Mint admits that the production cost of a cent in 2007 could be as low as 1.4 cents.
Pennies are no longer made of pure copper, which would make minting them prohibitively expensive, but rather of zinc and a thin coating of copper.
Proponents of the cent often suggest that the US government should continue to produce the coin, only with cheaper metal alloys than zinc or copper.
The United States Mint has been producing one cent coins since 1793 and will continue to produce cents until an official law mandates it ceases. Several bills have been introduced to stop the production of the cent, but so far none have managed to become law. Opponents of the dime suggest that legislators in zinc- or copper-rich states have economic interests in perpetuating the minting of a coin that has long outlived its usefulness. Even switching to five-cent nickel, which ironically consists mostly of copper with a zinc plating, would still not be cost-effective, as the production costs of a nickel can be as high as 7 cents.
Other arguments against the penny include the extra cost of processing the rolled pennies, the extra time required to make change with the pennies, and the lack of vending machines that accept the coin. Those who argue that consumers shouldn’t stop using pennies suggest that tax or price rounding would itself be a form of tax increase. Cents have a nostalgic value for many people, and phasing out the currency altogether could prove more disruptive to the economy than anticipated.
Other countries have voted to phase out their lowest value currencies with little or no adverse effect on their economies. Considering the raw cost of materials, processing and storage of the US cent, it may be time to consider withdrawing the coin over time and encouraging the consumer to stop using pennies whenever possible. Perhaps a one-cent coin could be minted using cheaper metal alloys, but the current zinc-copper clad Lincoln penny may have outlived its usefulness as currency.
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