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Your Money > Banking
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Pennies to heaven?
The future of America's one-cent coin is one of those debates that just won't go away.
July 1, 2003: 4:44 PM EDT

NEW YORK (CNN/Money) - Would eliminating the nation's least valuable coin be penny-wise but pound-foolish? It seems like everyone wants to put in their two cents.

Arguments about the penny's future have had hobbyists and lobbyists up in arms for years. A bill proposing its abolition was first introduced by Rep. Jimmy Hayes, R-La., in 1989. During the last session of Congress, another bill was introduced, this time by Rep. Jim Kolbe, R-Ariz.

Penny haters argue the coin is obsolete and costs more to make than it's worth. They think rounding purchases to the nearest nickel makes a better alternative (you'd pay a buck for 99-cent paper towels, and so on).

But supporters say the penny has a loyal fan base. Some lobbying groups -- Americans for Common Cents is just one -- say the rounding system would rip people off.

A penny for your thoughts: Should the penny get the boot?

For what it's worth

Leading the congressional charge against the penny is Kolbe, who in 2001 proposed the Legal Tender Modernization Act. The bill never made it out of committee in the last Congress, and it has not yet been re-introduced in this term.

A senior member of the House Appropriations Committee, Kolbe has worked extensively on U.S. currency concerns, such as introducing the dollar coin. At the center of his argument is the idea that making pennies costs more than the coins are actually worth.

"There's no profit whatsoever from making pennies, though the U.S. Mint will probably disagree," said Neena Moorjani, a spokeswoman from Kolbe's office.

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Indeed, the U.S. Mint does say each penny costs about 0.89 of a cent to make, while it collects a whole cent for each one.

"The cost of manufacturing has gone up or down at times," said Michael White, a spokesman for the Mint, noting that a year ago, the penny costs 0.81 of a cent. The variations, he said, depend on things like the cost of metal and volume of production.

Moreover, the number of new pennies minted in any year is determined by demand. "When the economy heats up, we tend to make more," White noted. The Mint makes about $24 million annual profit on the coin.

Movement stalled

The late Jim Benfield, who died in November 2002, was a leader of the Coin Coalition, a lobby that wants the penny banished. With his death, the "change change" movement lost some momentum.

"Certainly, it would be helpful to have someone else like him -- outside of Congress -- working on the issue," Moorjani acknowledged.

Benfield's position was that consumers ultimately pay for: 1) wrapping charges (the store pays about 60 cents for each roll of 50 pennies); 2) lost store productivity from penny users slowing the checkout line; and 3) lost wages paid to clerks counting pennies in the register on each shift.

"There's just a glut of pennies, and the U.S. Mint continues to crank more of them out," he told CNN/Money before his death. "Get rid of them."

Conflicts of interest

Each camp in this fight casts doubt on the other's math skills -- as well as the other's political supporters.

Americans for Common Cents contends that a rounding system would force up prices. They cite research by Raymond Lombra, an economics professor at Penn State University, who estimated that a rounding bill would force an annual $600 million "rounding tax" on consumers.

Others claim that if you bought a bunch of items, then added in sales tax, you'd have a 50-50 shot at getting a price of, say, $15.82 -- which would round down for a saving of 2 cents.

As for motivation, both sides are cynical about the other.

Americans for Common Cents has pointed out that a rounding bill would, presumably, spur demand for those copper-rich nickels. Rep. Kolbe is from Arizona, the largest copper-producing state.

According to the Coin Coalition, on the other hand, the zinc industry funds Americans for Common Cents.

The penny wars aren't going to end anytime soon. But which side will win? Flip a coin.

(Editor's note: this is an updated version of a story that first appeared in April 2002.)  Top of page




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