Legal Tender Modernization Act

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The Legal Tender Modernization Act was a bill proposed by United States Representative Jim Kolbe of Arizona in 2002. Its main goal was to stop the continual production of pennies, which were viewed as having virtually no value, yet cost the government billions of dollars to produce each year. The bill also mentions other provisions including:

Allows the Bureau of Engraving and Printing to print postage stamps, currency, and security documents for foreign governments and U.S. states or political subdivisions in order to make foreign currency consistent with U.S. foreign policy.

Five different new designs each year for the $2 Federal reserve notes

Prohibits redesigning the $1 Federal Reserve Note, as the $1 Federal Reserve Note is not as inclined into being counterfeited therefore there is no need of a redesign

States that the seigniorage (the U.S. government's profit earned from selling money to the Federal Reserve) should be included in the budget as a receipt

The bill failed to advance in either house and died when the 107th Congress adjourned.

[edit] Criticism

Critics of the Legal Tender Modernization Act state that by eliminating the penny, the rounding system would increase prices that could hurt the consumer, especially the lower class. Kolbe however has responded to such criticism and has stated that the rounding system "favors neither the consumer nor the retailer because the probability of rounding up or down is 50 percent either way -- it would all come out even in the end." [1] Other common criticisms include profit, public demand, high prices, dependence on charitable causes, consumer confidence, historical importance, and the decrease dependence of copper. [2] [3]