President Donald Trump has ordered the U.S. to stop minting pennies. His surprise announcement comes after decades of unsuccessful efforts to phase out the 1-cent coin.
I was curious if there were any downsides and asked perplexity.
Getting rid of the penny could have several potential downsides:
Increased nickel production: Eliminating pennies might lead to increased production of nickels to fill the gap in small-value transactions, which could be more costly since nickels also have a negative seigniorage[9].
Disproportionate impact on low-income families: The poor, who tend to use cash more frequently, could be more affected by price rounding, potentially facing a “rounding tax”[6].
Rounding up of prices: There are concerns that businesses might routinely round up prices to the nearest nickel, creating an informal tax on consumers[1].
Loss for charities: Some charities have historically benefited from penny donations, although modern alternatives like credit card “roundups” may be more lucrative[6].
Environmental concerns: While penny production has environmental costs, increased production of other coins like nickels could also have negative environmental impacts[7].
Potential economic impact: A study in Canada, which eliminated its penny in 2013, found that rounding imposed a small but measurable cost on consumers in grocery transactions[6].
you’re assuming businesses would be honest and fair about their changing prices. maybe some local stores will round down from 1.01 to 1.00 but I assume most major corporations will just round up to 1.05
I was curious if there were any downsides and asked perplexity.
Getting rid of the penny could have several potential downsides:
Increased nickel production: Eliminating pennies might lead to increased production of nickels to fill the gap in small-value transactions, which could be more costly since nickels also have a negative seigniorage[9].
Disproportionate impact on low-income families: The poor, who tend to use cash more frequently, could be more affected by price rounding, potentially facing a “rounding tax”[6].
Rounding up of prices: There are concerns that businesses might routinely round up prices to the nearest nickel, creating an informal tax on consumers[1].
Loss for charities: Some charities have historically benefited from penny donations, although modern alternatives like credit card “roundups” may be more lucrative[6].
Environmental concerns: While penny production has environmental costs, increased production of other coins like nickels could also have negative environmental impacts[7].
Potential economic impact: A study in Canada, which eliminated its penny in 2013, found that rounding imposed a small but measurable cost on consumers in grocery transactions[6].
Citations: [1] https://www.morningstar.com/news/marketwatch/20250209210/why-ditching-the-penny-may-not-cost-americans-much [2] https://www.npr.org/2025/02/10/nx-s1-5292082/trump-penny-mint-treasury [3] https://www.britannica.com/procon/US-penny-debate [4] https://en.wikipedia.org/wiki/Penny_elimination [5] https://wisevoter.com/issue/why-should-we-keep-the-penny/ [6] https://time.com/7215870/trump-us-penny-mint-costs-one-cent-coin-debate-explainer/ [7] https://www.thebalancemoney.com/get-rid-of-the-penny-4178219 [8] https://www.nytimes.com/2024/09/01/magazine/worthless-pennies-united-states-economy.html [9] https://www.cnn.com/2025/02/10/business/costs-of-pennies-and-nickels/index.html
Re: #2 Half the time they would benefit and half the time they wouldn’t. It would be a wash.
you’re assuming businesses would be honest and fair about their changing prices. maybe some local stores will round down from 1.01 to 1.00 but I assume most major corporations will just round up to 1.05
If they do anything as arbitrary as that then state’s Attorneys General will be on them The moment a forensic accountant finds it.