The US is saying goodbye to the penny

Cash purchases will likely be rounded up or down to the nearest nickel

By Mark Huffman of ConsumerAffairs

May 23, 2025

• The U.S. Treasury is discontinuing the penny, finalizing its last order for the coin due to its high production cost.

• Cash transactions will be rounded to the nearest nickel, raising concerns about a potential “rounding tax” that might slightly disadvantage cash users, particularly those with lower incomes.

• Economic studies suggest minimal consumer impact, with research by economist Robert Whaples indicating that rounding would not systematically increase prices, and might even slightly benefit cash-paying consumers.

A penny for your thoughts. Pretty soon, that information will cost you a nickel. The Treasury Department has confirmed a report by the Wall Street Journal that it is phasing out the penny and has placed its last order for blank coins.

The Trump administration floated the idea of abandoning the penny back in February, noting that it costs 4 cents to mint a single 1 cent coin. The administration estimates eliminating the penny will save the federal government as much as $56 million a year.

But the administration is hardly the first to recommend making the nickel the smallest denomination coin. In 2006, Robert Whaples, professor of economics at Wake Forest University and an expert on the history of the U.S. economy, presented his findings at the John Locke Foundation, a nonprofit, nonpartisan think tank.

“It’s time to eliminate the penny,” said Whaples, who estimated that the United States loses roughly $900 million a year on penny production and handling.

Penny-free marketplace

In a penny-free marketplace, what consumers pay at the cash register would be rounded to the nearest nickel for cash transactions. Because retailers price items to end in nine to entice customers, penny-preserving proponents claim that prices would tend to round up rather than down, creating an extra expense or “rounding tax” for consumers.

Some contend that this would be especially burdensome for the poor, who are thought to use cash more often.

Based on 2006 retail prices, Whaples estimated that getting rid of the penny would not lead to a rounding tax. His research focused on data from a week’s worth of transactions (about 200,000) from 20 locations of a gas station and convenience store chain in Alabama, Georgia, North Carolina, Pennsylvania, South Carolina, Tennessee and Virginia. He concentrated on the cash purchases and rounded prices to the nearest nickel, applicable taxes included.

In his presentation, however, Whaples said consumers paying cash would likely gain a minuscule advantage.

#goodbye #penny