Are Pennies Going to Stop Being Made?

The continued production of the penny in the United States has been a public debate for many years. Various stakeholders, including government officials, economists, businesses, and everyday citizens, present different perspectives on the coin’s relevance and future. This debate highlights the complex economic, social, and practical considerations involved in determining the fate of the one-cent coin. Understanding this discussion provides insight into the potential implications of any change to the nation’s coinage.

Current Status of Penny Production

The U.S. Mint currently produces pennies in the United States. The Mint distributes coins to Federal Reserve Banks, which supply them to commercial banks. Despite ongoing debates, the Federal Reserve consistently orders more pennies than any other denomination.

In 2024, the cost to produce a single penny increased to 3.69 cents, marking the 19th consecutive year that its manufacturing cost has exceeded its face value. This cost includes raw materials like zinc and copper, as well as production and distribution expenses. In 2023, the U.S. Mint incurred a loss of $179 million from penny production alone. Billions of pennies are minted annually; for instance, 3.2 billion pennies were produced in 2024.

Arguments for Eliminating the Penny

Eliminating the penny would reduce its financial burden. The penny’s production cost consistently surpasses its face value, leading to a financial loss for the government. This means taxpayers subsidize a coin that costs more to create than it is worth.

Beyond the direct production cost, the penny contributes to economic inefficiency. Consumers and businesses spend valuable time handling pennies, whether counting them, making exact change, or storing them in jars. This time, when aggregated across millions of transactions daily, represents a significant drain on productivity. Studies suggest that handling pennies can add 2 to 2.5 seconds to each cash transaction.

Inflation has significantly eroded the penny’s purchasing power over time, rendering it less useful for transactions. Its purchasing power has eroded, making it largely symbolic rather than a functional unit of exchange. As the value of goods and services increases, the practical utility of the penny diminishes.

The environmental impact of penny production is a growing concern. Pennies are primarily made from zinc (97.5%) with a copper plating (2.5%), and the mining of these metals consumes natural resources and energy. The refining processes for these metals can release pollutants into the environment, including sulfur dioxide, lead, and zinc. The transportation of billions of pennies from the Mint to banks also contributes to carbon dioxide emissions.

Arguments Against Eliminating the Penny

Retaining the penny addresses concerns about rounding. If eliminated, cash transactions would likely round to the nearest five cents, potentially leading to “inflationary rounding.” Critics suggest businesses might predominantly round prices upwards, increasing costs for consumers, particularly those relying on cash.

Many charities depend on small donations, and pennies often contribute to these efforts. Organizations conduct “penny drives” or collect spare change, allowing small contributions to add up to significant funds. Eliminating the penny could reduce this form of micro-donation, impacting the fundraising strategies of various charitable causes.

The penny also holds historical and sentimental value for many Americans. As one of the longest-standing denominations in U.S. currency, it features Abraham Lincoln, a revered historical figure. For some, its elimination would be seen as a disregard for this historical significance and a break from tradition.

Retailers often employ “odd pricing” strategies, such as setting prices at $X.99, to convey a sense of value or a lower price point. The removal of the penny would necessitate adjustments to these pricing models for cash transactions, potentially altering consumer perception and purchasing behavior. While electronic transactions would remain unaffected, the psychological impact on cash sales could be noticeable.

Transactional Impact of Penny Elimination

Eliminating the penny would immediately impact cash transactions through rounding. Cash payments would likely round to the nearest five cents, a practice called “Swedish rounding” or “cash rounding.” This means a final cash total ending in 1, 2, 6, or 7 cents would typically be rounded down to the nearest nickel, while totals ending in 3, 4, 8, or 9 cents would be rounded up.

For example, a cash purchase of $4.97 would likely round up to $5.00, while a purchase of $4.92 would round down to $4.90. These rounding rules would apply only to the final cash transaction total, after sales taxes. Non-cash transactions, such as those made with credit or debit cards, would continue to be processed to the exact cent, without any rounding.

Consumers would need to adapt to these new rounding practices. While the net effect of rounding is theoretically neutral over many transactions, individual purchases could result in a slight gain or loss for the consumer. Businesses would also need to update point-of-sale systems and train staff to implement the new rounding protocols consistently.