This is part of a series of recommendations for western states. The recommendations range from serious to more of a rant than anything serious. In the case of Montana and the penny, it’s more serious than not.

Montana should do away with the penny. Unilaterally. Of course, Montana can’t exactly do away with the penny unilaterally, but they can and should be the first state to render it useless. Or, at least, I don’t see why they can’t.

Montana, you see, has no sales tax. Like Oregon and other states, it lacks a statewide sales tax. Unlike Oregon, though, it does not generally have local sales taxes, either. You might think that this means that this obviates the need to do away with the penny, but in reality it only makes the problem more pronounced. In Montana, as with everywhere else, prices are set to ninety-nine cents. You know what this means? Lots of pennies. LOTS OF PENNIES. The take-a-penny-leave-a-penny bins overflow with them. Buy something, get a penny back. Buy two somethings, get two pennies back. You have to buy things in increments of five not do deal with pennies back.

How does this differ from states that have a sales tax? There are, after all, a lot of pennies exchanged there, too! Here’s the deal, though: If you’re in Idaho, and you give a penny here and take a penny there and it all evens out in the end. In Montana, however, the exchanges are asymmetrical. You get a lot more pennies than you give, because when you buy something, you have to count out four pennies (three pennies for two somethings) in order to get rid of them. A good portion of the time, you don’t bother. They keep the penny, you put it in the overflowing penny bin. Whatever. You’re not going to mess with it.

On its face, this exposes the problem with pennies in general and why we should do away with them nationally. But nowhere is this more pronounced than in no-sales-tax-states.

So what should Montana do? Montana should require that all transactions within its state be priced to the nearest five cents. Vendors should be required to round down, or alternatively if they round up they should have to post the rounded price on all single-purchase items (a gallon of gasoline, for instance, would be immune because few ever buy a single gallon).

With this, Montana would hopefully be setting the stage for other states to follow suit. Even though the other states have the sales tax which supplies symmetry to penny transactions, it’s still a counterproductive exercise. The states that have a sales tax can simply redesign their tax to x% plus whatever it takes to get an increment of five.

Now, there are some people who say we should do away with the nickel, too. I am not opposed. One step at a time.

Category: Market, Statehouse

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4 Responses to Montana Should Do Away With The Penny

  1. Φ says:

    Good point. I find that more and more I whip out the plastic on even trivial transactions just to avoid fooling with change.

  2. Scarlet Knight says:

    Montana should require that all transactions within its state be priced to the nearest five cents.

    Did you see that Canada will no longer be minting its penny?

    I am not opposed [to doing away with the nickel]

    If the nickel were made entirely of copper, it would be worth 3.76 cents in terms of its meltdown value. If they used a copper-aluminum alloy, it would be even less. That’s why I have no problem keeping the nickel, as long as the composition was changed. Going to a one-decimal-place monetary system would be too radical, plus it would render the quarter useless.

  3. trumwill says:

    Knight: I did! I was actually considering posting this around the time they made that announcement, but decided that I would bring up the subject after everyone else (except you!) had forgotten about it.

    Yeah, I forgot about the quarter. Proponents of doing away with the nickel had a plan for that, changing it to some denomination of ten, but I can’t remember what it was.

  4. trumwill says:

    Phi, I’m still old school when it comes to using plastic. It tends to (or at least used to) hurt vendors when you do it for purchases that are too small. But I understand the inclination (and there’s an argument that the effect it has on vendors isn’t your problem).

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