It costs between two and two and a half cents to produce one penny.
So why are we still producing them? In real dollars, according to Wikipedia, “The loss in profitability due to producing the one cent coin in the United States for the year of 2012 was $58,000,000.” That’s $58 million dollars in the red to produce a coin that’s worth one one-hundredth of one dollar. Siting a similar loss in profitability, Canada, as of this past fall, started to pull the penny out of circulation.
What used to be a cheap metal, copper has skyrocketed in cost and is now double what it was two decades ago. Granted, the penny as it’s minted today is only 2.5 percent copper and the majority of it is made of zinc, but apparently even that small percentage has an impact on cost.
Is it for sentimental reasons we don’t want to give up the penny? Or maybe we don’t have another coin to put Lincoln’s profile on?
No, the negatives are threefold:
First, talk of getting rid of or changing anything has the opposite effect–hoarding, which, when it comes to coins leaves an imbalance on the market. Secondly, there is an economic concern that it would amp up inflation, as retailers without the increment of one cent, would most likely round up rather than down. And third, it would negatively impact bottom lines for states (not to mention municipalities) that have penny incremental sales taxes, such as Pennsylvania, which has a six percent sales tax. Rounding that down to a nickel has a big impact on the bottom line for tax revenues.
So what’s the U.S. Treasury to do? I have a compromise. Why not just change the composition? Eliminate the copper and stick with zinc and whatever other cheap metals are available. Better yet, use something recycled.