The other day I discovered a tax token amongst my stuff. It was worth, in its day, a quarter of a cent, and was minted during the Depression. That's when so many sales taxes were introduced to grind every last quarter-cent from even the poorest of Americans. We needed government that much.
Whew: there's an idea whose time long went. (Well, actually, I was alive when Missouri and Oklahoma finally got rid of theirs; most other sales-tax token states had said good riddance long before.)
The penny remains, though. It's still with us, and not just for taxes. Inflation has happened since the departure of the tax token, so the penny's value has decreased since. And, meanwhile, the cost of zinc, one of its main current component elements, is rising. A penny was worth just under a cent (.97 to be exact) in metal last year; each one is worth 1.4 cents now.
Which gives Representative Jim Kolbe, Republican from Arizona, a pretty good reason to abolish the Lincoln penny, our current one-cent "token." When the cost goes just a tenth of a penny up, he predicts, "[e]veryone will horde their pennies because the metal will be worth more than the coin."
That is Gresham's law, isn't it? Bad money — that is, paper dollars, and nickels and dimes — will "drive out the good" because the good pennies are legally valued at less than their commodity value.
So Kolbe has a point. Let's stick with the "bad" money! Otherwise, some will get rich melting down pennies while the rest of us have to make do without. Maybe the penny should be gotten rid of, deliberately, before it goes without any plan at all.
Trouble is, if we do like Australia did, and make a rule about rounding up and rounding down in our cash transactions, won't there be a tendency to price goods in just such a way to reap a rounding-up reward? Will the sales tax states then insist that the incidence of this rounding reward accrue to the state and not the merchant? And won't this just be a mess?
Kolbe may not have addressed this issue, but he has pooh-poohed most arguments against the removal of the penny from circulation. Repeatedly. It seems like every few years he makes some motion in Congress to do just that.