As pennies dwindle, cents become hypothetical

In a bulletin published last week, the Georgia Department of Revenue took on a question that might have piqued the curiosity of the philosophers of old. It concerned the end of the penny.

The striking of the last penny by U.S. Treasurer Brandon Beach on Nov. 12 received relatively little notice, given that the penny’s been around for 232 years and implanted itself firmly in the language — “a penny saved, a penny earned,” etc. Will “not one red penny” sound as vehement when children have never seen one?

President Donald Trump ordered an end to the production of the penny coin, citing costs that have risen to more than 3 cents a coin. That leaves an estimated 114 billion pennies still in circulation, but many of those coins are sitting in mason jars and not really moving through the economy. Vendors are already reporting penny shortages, prompting the Revenue Department to announce a new policy regarding cash transactions.

Suppose that after state sales tax is added to the price of an item, the total is $19.97, and the customer pays with a $20 bill. What happens if the vendor doesn’t have the three pennies for change?

“If the sales price plus sales tax results in a total that cannot be collected without pennies, dealers may round the total amount due to the next lowest, next highest, or nearest nickel,” the Revenue Department said last week. That would seem to give dealers their choice of how they want to split the difference of a few pennies. The hitch — at least some of the dealers might see it as a hitch — is that whether they round down 2 cents or up 3, they still owe the Revenue Department whatever the sales tax is, precisely to the penny.

So when it’s counted as cents on a digital tax ledger, the penny will continue to serve the role it always has, as the smallest irreducible fragment of the entire monetary system, a tiny kernel of value on which all of it is based. But in real transactions, where actual pennies will be scarcer and scarcer, the definition of three cents, say, will from now on be a more theoretical three cents, untethered from Lincoln’s stolid profile looking up at us to guarantee it.

This might have been a bigger problem in the days before the digital economy, when even the smallest transactions are carried out electronically. As things are now, it’s just a small but nagging imprecision: the difference between the cent you still owe and the penny the storekeeper doesn’t have. It’s just a tiny fraction of all transactions, but it has been estimated that the cost of all that rounding will still come to a few million dollars.

Economists say the demise of the penny is long overdue. It has been estimated that the government will save tens of millions with the move, although concerns have been raised because nickels cost even more to produce than pennies, and we could need a lot more of them. Beach, perhaps not immune to a little pun to mark the occasion, called the striking of the last penny a “return to common sense.”

Perhaps so, but in its bulletin last week, the Department of Revenue made it clear that it is willing to change on a dime if things don’t work out. And it revealed a lingering wariness about what this might lead to next.

“The Department recognizes this is an evolving issue and reserves the right to change its guidance following any changes made to state or federal law or policy,” the bulletin said. “Under no circumstance should this bulletin be used to justify a rounding decision that is more than 4 pennies.”

This promises to be an exciting time for numismatists, who have long paid close attention to the little things that make one penny worth more than another to collectors. Even the standard-issue pennies in your sock drawer are likely to be worth more in a year or two, if only because they’re not making any more.

And what of the fat nickel, which has rested comfortably so long between the penny and the dime? Can it pull its new weight?