Are Pennies Going Extinct? A Look at the Arguments

The one-cent coin, commonly known as the penny, has been a constant presence in American commerce for generations. Despite its ubiquity, questions about its ongoing relevance and future have become common. A public debate continues regarding whether this lowest denomination coin should remain in circulation. Arguments for and against the penny’s existence touch upon economic considerations, practical implications, and its symbolic value. This discussion involves consumers, businesses, and government entities.

The Current Status of the Penny

The penny maintains its status as legal tender in the United States, officially recognized for financial transactions. The U.S. Treasury Department announced plans to discontinue penny production starting in 2026. However, the coin will remain legal tender and in circulation. This decision signals a significant shift in U.S. currency policy, even without enacted federal legislation for full elimination.

As of 2024, the U.S. Mint spent 3.69 cents to produce each Lincoln cent, marking the 19th consecutive year its production cost exceeded its face value. In 2024, producing 3.2 billion pennies resulted in a reported loss of $85.3 million for the U.S. Mint. Approximately 240 billion pennies are in circulation. However, many often sit unused in households rather than actively circulating.

While federal law designates coins as legal tender, it does not compel businesses to accept them. Individual establishments can refuse pennies if they choose. Proposed legislation, such as the Common Cents Act introduced in April 2025, aims to formally end penny production and establish uniform rounding rules for cash transactions. This indicates ongoing governmental discussion about the coin’s future.

Arguments for Continued Penny Circulation

Proponents of the penny express concern that its elimination would lead to widespread price increases due to rounding. This apprehension, sometimes termed a “rounding tax,” suggests businesses would consistently round prices up to the nearest nickel. Such a change could disproportionately affect lower-income individuals who conduct more cash transactions.

The psychological impact of pricing strategies also supports the penny’s retention. Many retailers employ “charm pricing,” setting prices just below a whole dollar amount, such as $9.99. This strategy creates a perception of a lower price, influencing consumer buying decisions. Without the penny, businesses might find it challenging to maintain this psychological advantage, potentially leading to adjustments in pricing models.

The penny also holds cultural and historical value for many Americans. Featuring Abraham Lincoln, the coin serves as a tangible connection to the nation’s past. This sentimental attachment contributes to public hesitation about its removal, viewing it as a symbol of thrift and national identity. Beyond sentiment, pennies play a practical role in charitable giving, with many organizations relying on small coin donations. “Take a penny, leave a penny” trays also highlight its utility in minor transactions.

Arguments for Penny Discontinuation

A primary argument for eliminating the penny centers on its production cost, which consistently exceeds its face value. This inefficiency means taxpayer funds are used to create a coin that immediately loses value upon minting. The U.S. Mint has reported continuous losses from penny production for many years.

The time wasted by consumers and businesses handling pennies during transactions also contributes to arguments for discontinuation. Both customers and cashiers spend moments counting, searching for, and managing these low-value coins, which slows down checkout processes. This inefficiency extends to businesses, which incur hidden expenses related to sorting, transporting, and depositing large quantities of pennies. Simplifying cash management operations could reduce labor costs and bank deposit fees for merchants.

The negligible purchasing power of the penny in modern economic contexts further supports its removal. Inflation has significantly eroded the coin’s value, rendering it largely irrelevant for purchasing goods or services. Many pennies end up unused in jars or forgotten in cars, indicating their limited utility in active commerce.

International Approaches to Low Denomination Coins

Numerous countries have addressed the challenges of low-denomination coins by eliminating them, providing precedents for the United States. Canada phased out its one-cent coin in 2012, ceasing distribution in 2013 due to high production costs and diminished value. The cost to the Canadian government for supplying pennies was about $11 million annually. Following this change, cash transactions are rounded to the nearest five cents, while electronic payments settle to the exact cent. This rounding applies to the total bill after taxes, not individual items.

Australia removed its one- and two-cent coins from circulation in 1992, citing inflation and rising production costs. These coins, while still legal tender, are no longer actively circulated, and cash transactions are rounded to the nearest five cents. New Zealand eliminated its one- and two-cent coins in 1990 and later discontinued its five-cent coin in 2006. Studies in these countries found no significant increase in price inflation following the removal of these coins, suggesting competitive markets prevent widespread price manipulation.

Several European countries have also stopped minting one- and two-cent euro coins, opting for rounding rules in cash transactions. Countries like Finland, Ireland, and the Netherlands have introduced voluntary or mandatory rounding of total cash payments to the nearest five cents. This global trend reflects a move towards reducing the economic and environmental costs of producing and managing small-denomination coinage. These nations demonstrate that economies can adapt to a currency system without the lowest-value coins, with minimal impact on consumer prices.

Practical Effects of Penny Elimination

The elimination of the penny would primarily affect cash transactions, requiring the implementation of rounding rules. Payments would be rounded to the nearest five cents, making the nickel the lowest denomination in practical use. A common approach, observed in other countries, involves rounding totals ending in 1, 2, 6, or 7 cents down to the nearest nickel, and totals ending in 3, 4, 8, or 9 cents up. This system, often called “Swedish rounding,” aims to create a statistically neutral effect over many transactions.

Sales tax calculations would continue to be precise, calculated to the exact cent, with rounding only applied to the final cash payment total. While a sales tax might result in a total of $X.YZ, the cash amount exchanged would be rounded. States and local governments would need to issue guidance on how businesses should handle sales tax remittances when rounding occurs. This could lead to minor audit discrepancies due to the difference between the calculated tax and the rounded amount.

Businesses would need to adapt their point-of-sale (POS) systems to automatically apply these rounding rules for cash payments. This ensures consistency and reduces potential errors in cash handling, particularly for retailers with high volumes of low-dollar transactions. Businesses using older systems might need to invest in upgrades or increase reliance on digital payment solutions. For consumers, the change would involve a psychological adjustment to rounding, though digital payments would remain unaffected. Vending machines, self-checkout kiosks, and parking meters that currently accept pennies would also require recalibration or replacement.