>It currently costs more than a penny to make a penny. This is mostly due to the rising cost of raw materials, especially zinc, which is about 98% of a penny’s weight.
Current estimates of how much it costs range from 1.2 to 1.7 cents to make, including materials, production, and delivery costs.
I’ve seen some people proposing eliminating the penny, and Jim Kolbe of Arizona as proposed having the mint come up with yet another formulation that would make it cheaper to produce, but I have a different idea that may work:
The mint should be allowed to charge its customers (really the Federal Reserve buys all the mint’s production, then sells it to member banks) at least what it costs to make coins.
That means that if it costs 1.6 cents to make a penny, then to buy 10,000 bagged pennies ($100 worth) should cost you $160. Banks would then be allowed to pass those costs onto final customers as they saw fit. They probably wouldn’t charge the average checking account customer 80 cents for a single roll of pennies, but the commercial customers that need ten dollars in pennies or more per day, would probably get charged a premium for pennies.
I think this would have two effects, both beneficial to the government’s goal of not losing money on making pennies.
1. Retail stores that are big penny users would be encouraged economically to figure out how to change their prices so it requires fewer pennies to make the transaction. Probably they would round the prices to the nearest nickel. The reduced demand for pennies should improve the situation for penny production.
2. When faced with penny prices from the mint at a 50-60% premium, banks may get creative with programs to encourage people to turn in their pennies. I can envision Coinstar waiving their 9% commission on coin counting, or banks offering 55 cents for a roll of pennies (a 10% return, not bad).
Overall, with inflation trending upwards under Federal Reserve guidance, the eventual elimination of the penny seems inevitable. For political reasons, we haven’t been able to get rid of it. We can experiment with cheaper and cheaper compositions (copper coated steel, zinc coated steel like during WWII, they minted some small number of aluminum cents back in the 1970s), or we can just start not losing money on minting cents.
I’d like to note that I made it through this entire post without resorting to a terrible pun like “It only makes cents” or “What a cents-ible proposal”. You’re welcome.