A Tax on High Earners, a Problem With Change
Washington state lawmakers approved a 9.9 percent annual tax on personal earnings over $1 million, expected to generate up to $4 billion annually. The revenue will fund childcare and eliminate sales taxes on certain goods. The vote came after a marathon debate on Wednesday.
The Penny Problem Spreads Across States
President Donald Trump announced an end to penny production early last year, calling it wasteful. The U.S. Mint confirmed it cost 3.7 cents to make each 1-cent coin in 2024. The shortage of pennies in cash registers last summer forced consumers and businesses to confront a future without exact change. The Treasury Department said it will continue circulating the roughly 114 billion pennies that exist for "as long as possible," and pennies must still be accepted as payment.
Rounding bills have been introduced in about two dozen states since late last year, according to an Associated Press analysis. Bills to address penniless cash transactions have passed both chambers and await the governor's signature in Arizona, Florida, Oregon, Tennessee, Virginia, and Washington.
How Rounding Would Work
One solution gaining traction is symmetrical rounding, rounding to the nearest nickel. If the final price after taxes ends in one, two, six, or seven cents, cash payment rounds down. For example, $1.91 or $1.92 becomes $1.90. If the price ends in three, four, eight, or nine cents, cash payment rounds up. For $1.98 or $1.99, the consumer pays $2.
Indiana signed rounding into law this month under Republican Gov. Mike Braun, initially requiring businesses to round cash purchases for transactions that do not end in a zero or five, but lawmakers revised that provision in a second bill making rounding optional, which would take effect Sunday if Braun signs it. In Tennessee, Republican Rep. Charlie Baum sponsored legislation that makes symmetrical rounding exempt from legal claims under a state consumer protection law but does not require it. Baum said the measure is "to provide safe harbor for private businesses."
Who Wins and Who Loses
The Treasury wrote that prices would be "rounded down just as often as they will be rounded up, so there should be no overall effect on consumer prices." However, researchers at the Federal Reserve Bank of Richmond used a 2023 survey showing prices that did not end in zero or five were especially likely to end in eight or nine. Overall, prices more often being rounded up would lead to millions of dollars gained by businesses and lost by consumers collectively, amounting to a few pennies lost per person.
Nikki Capozzo-Hennessy, 50, a Trumbull, Connecticut resident who runs a food truck business, posted her grocery store receipt online when she noticed a rounding adjustment on a purchase of $8.73 with tax. The store rounded down and she gained three cents. She said it might feel taxing to hand over extra pennies every time, but she thinks one consistent rule is practical. "At the end of the day it's three cents, but I can imagine with all the purchases that you make, it can add up," she said.
Federal Action and Remaining Questions
A bill introduced last year in Congress and passed out of the House financial services committee would apply symmetrical rounding across the country. U.S. Rep. Lisa McClain, R-Mich., said in an email the federal law is important to prevent a "confusing patchwork of state policies." The bill has not been voted on in the House and would still need to move through the U.S. Senate before reaching Trump's desk.
Washington state Rep. April Berg, who introduced a rounding bill there, said she understands people who feel frustrated losing a penny but that the elimination of the hard currency leaves little option. "We did make sure that everyone is allowed to pay exactly what they owe," Berg said of her legislation.
The Treasury says ceasing penny production will save $56 million annually, but rounding could increase demand for nickels. The 5-cent coins also are costly to make, reaching nearly 14 cents each in 2024, according to the Mint. The proposed federal legislation currently includes a potential cost-saving solution, allowing the Treasury to adjust coin composition to use cheaper zinc and nickel instead of copper and nickel.
