There is nothing more beautiful than the one-cent piece in the opinion of this writer and collector of coins. But many in this land of the free feel differently. Let us investigate a world without the lowly one-cent piece. How on Earth would we tax groceries and other nominal products and services? Would we just round to nearest nickel or dime? How would companies round, up or down? These questions seem simple enough, but you do the math and see if you don’t come up with some unusual circumstances. For instance your grocery bill at a dollar store is $1.00 and the sales tax rate is 8%. Your total bill comes to $1.08. How do you charge $1.08 without the lowly one cent piece? Notice I don’t call it the penny, because it is not a penny, it is a cent. The penny is actually from the United Kingdom, but it seems that we have borrowed that term for our own one cent piece. If you don’t believe me take out a Lincoln cent and read the reverse. It will say one cent. The solution could be to make the sales tax rate in increments of the lowest denomination. Let us go back to my previous example at a dollar store. The bill comes to $1.00 and the sales tax rate is 10%. Your total bill would come to $1.10. Problem solved right? Not so fast, what about if you want to raise the sales tax to 11%. Now you need that lowly one cent piece again. Your bill will come to $1.11! The one cent piece, for all the grumblings, seems to come in handy in those circumstances and is more useful than we give it credit for.
So what is the problem then? According to the US Mint, as of May 2010 the cost of producing the one cent piece is 1.67 cents and consists of 97.5% Zinc and 2.5% Copper to give them that distinctive copper color. At that rate given the number of cents produced, you can see it is a losing proposition for the US government. The production figures for the one cent piece have been down for the last few years due to the Recession most likely, but the US mint has produced nearly 3.2 billion one cent pieces from January to September of this year so far. In 2009 the US produced the Bicentennial Lincoln one cent piece in 4 designs and produced 2.3 billion pieces. In better times the number of one cent pieces produced has been much higher, for example in 2000 the US mint produced 14.3 billion pieces according to Whitmans – The official Red Book – A guide book of United States Coins 2004. By my calculations the US government has already lost $21.44 million and under more normal production times could lose as much as $67 million to $94 million. And figures could go higher from there if the price of Copper and Zinc were to go up further.
How about getting rid of the one cent piece and just having the nickel as the lowest coin? Sounds like a great idea, but consider this, according to the US mint the nickel costs around 7.7 cents to make currently. At that rate the US government again stands to lose millions. Many would come to the conclusion that getting rid of both the one cent and nickel pieces would be the solution, but think back to our dollar store example. What happens when your bill comes to $1.08? Do you get charged a premium of $1.10? How would most consumers feel about that? Let us look for another solution.
Let us look north of our border for the answer. Those very creative Canadians have come up with the answer. Use a cheaper base metal for the production of the one cent piece. That base metal would be Steel! I don’t know the exact cost of the Canadian one cent piece, but it is most likely under one cent, because the price of Steel is much cheaper than Zinc or Copper. The composition of the Canadian one cent piece is two-ply copper finish plated steel. They have also changed the composition of the 5 cent, 10 cent and 25 cent pieces. These coins are composed of three-ply nickel finish plated steel. The result is a coin that is a bit lighter than the previous pieces produced by the Royal Canadian Mint, but they look and feel much the same as the old composition. Even this solution is not without controversy as the nickel needs to be revamped and this will make the vending machine industry need to update their vending machines to accept the lighter weight of the newly composed nickel.
In the long run, I feel that changing the composition of the one cent and nickel pieces is the best solution, because it will allow the production of these nominal coins to continue. They still seem to serve a purpose for now and they look great in US Proof and Uncirculated sets!