Canada Kills the Penny and Saves Millions: Why We Should Too
Commodity metal costs are soaring. So much so that it now costs more for the U.S. Mint to produce a penny (or a nickel) than the coins themselves are worth.
Vexed by the problem, the Obama Administration has put forward a plan to debase the metal content of the coins, to try and bring the cost down.
Up in Canada, however, they took a different approach: They stopped making pennies.
That's right, folks. On May 4, the Canadian Mint minted its last penny.
Technically, the 1-cent denomination still exists. If you have Canadian pennies lying around, merchants will still accept them. They're still legal tender. Store owners, however, are being encouraged to start rounding prices to the nearest 5-cent denomination.
Consumers, ever wary, wonder whether this means all prices will get rounded up, hitting their pocketbooks. Whether this is how things play out, though, remains to be seen.
What is certain, according to the Canadian government, is that halting the production of Canadian pennies will save these same consumers a good jingle's-worth of pocket change come tax time. The government estimates that putting a hit out on the penny will save it about $11 million (Canadian) in production costs.
Murder for Hire, or a Murder to Admire?
Adding insult to injury, Canada didn't come up with this penny-killing idea on its own. Fact is, the U.S. Congress has already floated the plan ... twice.
In 2001, a bill titled the Legal Tender Modernization Act proposed eliminating the penny. When that failed, the 2006 Currency Overhaul for an Industrious Nation (COIN) Act would have required rounding to the nearest nickel -- again, a la Canada.
So that $11 million that could easily have been ours, too. And actually, we'd save even more, for a pair of reasons.
First, we mint far more pennies than our less-populous neighbor to the north. Last year, the U.S. Mint produced nearly 5 billion pennies. Second, ours cost more than theirs. According to government statistics, Canada says it's been minting the Canadian coins at a price of about 1.6 cents apiece, while each U.S. penny costs 2.41 cents to make. For the U.S. taxpayers, that adds up to almost $70 million we could have saved by dumping the 1-cent piece.
Moral of the story: If killing the penny makes sense for Canada, then it should make a lot more cents for the United States.
Motley Fool contributor Rich Smith holds a special place in his heart for bad puns. He owns some of the currencies mentioned above.