Thoughts for your pennies: States start to give rounding guidance

Alishia Topper put herself in her residents’ shoes — let’s assume they are penny loafers.

If she was walking into the Clark County, Wash. treasurer’s office to pay her property tax in cash, she had already demonstrated that she didn’t want to pay the surcharge necessary to complete the transaction electronically. So, she probably wouldn’t want that total to be rounded up to the next nickel, meaning she’d pay up to 2 cents more.

“Most people who come in to pay property taxes or most taxes are not interested in paying a penny more. So, rounding up didn’t sit well for me or my office,” she said. “We did research on symmetrical rounding (even totals are rounded up, odd totals are rounded down) and we didn’t like that.”

She is in this predicament, as the county treasurer, because the county’s bank notified her that it wouldn’t be able to fulfill its request for pennies this year. That follows the Treasury Department’s discontinuation of penny production last fall, following a nearly twofold increase in production price over the last 10 years.

Clark County would round down, for the time being. In 2015, the county processed almost 4,300 cash transactions totaling almost $1.8 million. Those cash transactions made up 8% of the total property tax payments.

“There still is a portion of the community that don’t want to pay fees and they want to pay cash. And we will accommodate that,” Topper said.

Although the U.S. Treasury reported that the move would save the U.S. Mint $56 million in annual savings, it’s adding uncertainty for businesses and governments that accept cash. Although the Federal Reserve estimates 114 billion pennies are in circulation, there’s been no federal guidance on how governments should handle transactions. The Federal Reserve Bank of Richmond noted that consumers could end up paying a “rounding tax” if transaction amounts are skewed toward values that round up.

A National Conference of State Legislatures report cautioned that “while the fiscal impact of rounding might be limited for state revenue, retailers and consumers, the absence of a regulatory framework introduces legal risks and potential confusion among stakeholders.”

Topper looked with envy at stronger national direction elsewhere.

“In Canada, there was a huge nationwide campaign around the discontinuation of that coin, and they even had coin exchanges and marketing campaigns, education campaigns,” Topper said. “In this scenario, it was the banks, notifying those of us who handled cash tender that, ‘Hey, we don’t have this option for you anymore. Sorry.’” 

State governments are taking up the issue piecemeal. Washington Gov. Bob Ferguson recently signed a bill giving state retailers the option to round cash purchases up or down. Indiana Gov. Mike Braun signed a similar bill, and Oregon’s Legislature passed a rounding option bill, too.

“Hopefully that will get rid of a lot of the ambiguity and a lot of the differentiation between what we’re going to do here in Clark County versus what you might do in Cowlitz County, which is just north of us,” Topper said.