Will America Ever Phase Out Small Coins like Pennies, Nickels, and Dimes?
The question of whether America should phase out its smallest denominations of coins has sparked debate among economists, policymakers, and the general public. This article delves into the practical and ethical aspects of doing away with pennies, nickels, and dimes and explores the arguments for and against such a move.
The Case for Phasing Out the Penny
Cost-Effective: Phasing out the penny is clear-cut due to its high production cost. It is reported that the U.S. Mint spends approximately 2 cents to produce each penny. In contrast, the cost to produce a nickel is 8 cents, making it a more logical candidate for removal.
Practical Solutions: To make purchases without counting pennies, businesses can round prices to the nearest nickel. For example, a purchase of $3.98 would round to $3.95 or $4.05, depending on the transaction. This method addresses the inconvenience of counting pennies and the associated costs without requiring a complete overhaul of the coinage system.
Challenges and Concerns with Removing the Nickel and Dime
Nickel Removal: The nickel's removal presents a more significant challenge, as it would render it difficult to make certain change (e.g., 15 cents). Addressing this issue would require significant changes to the current coinage system. Introducing a 20-cent coin, which was minted briefly in the 1870s, could potentially solve this problem. However, replacing all quarters and introducing a new 20-cent coin would necessitate a substantial change to the Coinage Act similar to the reforms enacted in 1965, when silver was phased out of dimes and quarters.
Dime Retention: Dimes are crucial for sales tax calculations, which are typically not included in sticker prices. Without dimes, businesses would face difficulties in accurately calculating and applying sales tax, leading to potential disputes and legal issues.
Negative Implications of Removing All Small Coins
Irrevocable Change: Some argue that removing all small coins would be a form of hidden taxation. For instance, at a gas station, the price often includes a fraction of a cent (9/10 of a penny), which, over time, can accumulate to a significant amount. Therefore, completely eliminating small coins could be seen as an unfair financial burden, especially for low-income individuals who rely on exact change.
Comparison with Other Countries
Canada: Canada has already made significant strides towards phasing out pennies. Since 2013, the Royal Canadian Mint has ceased production of one-cent pieces, and businesses have adapted to rounding to the nearest nickel without major issues.
Wallet Lightness: The removal of small coins would lead to lighter wallets, reducing the need for heavy change. This convenience is significant, particularly for tourists and travelers who often find emptying their wallets cumbersome.
Technological Advances and Rounding Practices
Electronic Transactions: The prominence of electronic transactions, credit cards, debit cards, and mobile payments has already reduced the reliance on physical coins. Vendors and consumers are increasingly comfortable with electronic methods of payment, which can simplify transactions and reduce the need for exact change.
Government Policies: Some government agencies advocate for the elimination of coins and paper currency in favor of digital payment systems. Digital currencies, while convenient, raise concerns about privacy and surveillance. Government agencies could potentially track and manipulate electronic transactions, which might be used to target dissidents. Fake digital currencies like Bitcoin also present significant risks due to incidents of hacking and unauthorized use.
Conclusion
The debate over phasing out small coins in America remains complex and multifaceted. While the cost of producing pennies and nickels is a compelling argument for change, the practical and ethical implications must be carefully considered. As technology continues to evolve, electronic transactions are becoming increasingly prevalent, offering alternative solutions to the challenges of using small coins.
Ultimately, any decision to phase out these coins must be carefully balanced to ensure fairness and convenience for all parties involved. The journey towards a cashless society is fraught with challenges, but the adaptability of the American public and businesses may yet lead to a smoother transition.