Should the US Penny Be Ditched?

President Trump has directed the Treasury Department to stop minting new pennies, citing the rising cost of producing the one-cent coin.

“For far too long the United States has minted pennies which literally cost us more than 2 cents. This is so wasteful!” he said in a post on his Truth Social platform. “Let’s rip the waste out of our great nations budget, even if it’s a penny at a time.”

While the debate over whether to keep the penny in circulation has gone on for decades, particularly as costs to produce them have steadily risen, the movement picked up steam last month after Elon Musk’s Department of Government Efficiency raised the prospect in a post on X, highlighting the penny’s cost.

The U.S. Mint reported losing $85.3 million in the 2024 fiscal year that ended in September on the nearly 3.2 billion pennies it produced. Every penny costs 3.69 cents to produce, up from 3.07 cents the year before and 1.5 cents in 2016, according to CBS News.

The move would not be unprecedented. Many countries, including Canada, Australia, and New Zealand, already ditched their one-cent coin years ago. Similar to other countries, should the penny be eliminated, the final, post-tax total in all cash transactions in the U.S. is expected to be rounded, either up or down, to the nearest five-cent increment.

Proponents of keeping pennies in circulation argue that removing them could fuel inflation by forcing consumers to pay a rounded-up price in cash transactions: For example, if an item costs $10.08 after tax, it would be rounded up to $10.10.

However, those in favor of eliminating the coin argue that the impact would be negligible as prices will not always be rounded up with transactions conducted with bills and coins.

“For cash transactions we would begin rounding to the nearest nickel,” Robert Whaples, an economics professor at Wake Forest University, told the Miami Herald. “$1.99 is rounded to $2 and $2.01 is also rounded to $2.”

“Because the last digit of our cash-register totals is completely random, there will be as much rounding down as rounding up. Customers would not lose, on average,” he added, citing a paper he wrote in 2007.

He also noted that transactions are increasingly cashless, and these won’t be affected at all. A 2022 Gallup poll found that 73% of respondents made less than half of their purchases using cash, up from 47% in a 2017 survey.

For retailers, eliminating the penny could reduce checkout waits.

The National Association of Convenience Stores, which has long endorsed the elimination, commissioned a study in 2006 and found that without having to count pennies, the average transaction time fell by 2 to 2.5 seconds. Jeff Lenard, a spokesman for the group, told CNN, “Convenience stores sell a lot of products, but what they really sell is speed of service.”

However, eliminating the penny could alter pricing strategies, including the effectiveness of pricing goods to end with .99, rather than rounding up to the nearest dollar. Pricing ending at .99 has been found to offer a greater perception of value.

The loudest argument against pennies being eliminated is that it could force the production of more nickels — the U.S. Mint estimates that it costs nearly 14 cents per five-cent coin.

“Without the penny, nickel production could nearly double, which would increase the mint’s losses,” Mark Weller, executive director of the pro-penny group Americans for Common Cents (ACC), told ABC News.

The pro-penny advocacy group in a statement also said it believes an “invisible rounding tax” would disproportionately harm low-income individuals and families who rely more heavily on cash purchases, while noting that polls show the majority of Americans favor keeping the penny.