The E-Sylum:  Volume 10, Number 6, February 11, 2007, Article 21

ROUNDING OFF CASH TRANSACTIONS

Dick Johnson writes: "To answer David F. Fanning's question on revaluing
the cent (I still find it difficult to use the term "rebase" as in last
week's E-Sylum), I can offer two examples:

"More than two years ago Israel discontinued the one–agora denomination,
forcing Israelis to round off cash transactions to 5 agora multiples.
This was reported here in The E-Sylum on February 20, 2005. At that time,
a drug store chain in Israel (SuperPharm) rounded DOWN all prices ending
in 1 to 4 agora and 6 to 9 agora to multiples of five agora (instead of
UP as some might expect greedy retailers would do). The pharmacy chain
publicized the new policy in their advertisements. They found this was
an inexpensive way to gain a competitive edge in a retail business –
albeit small –- at a very low cost.

"States here in America, after introducing the sales tax in the 1930s,
issued "mill" tokens (of metal, then plastic and paper) to collect the
tax of a few mills on a dollar. Ultimately they turned to rounding up
to a full cent (and still do!). I remember in the late 1940s as a teenager
being a cashier at an A&P grocery store shortly after this. Each cash
register had a pasted schedule for the sales tax charge for sales: up
to, say, 15c – no charge, from 16c to 39c –one cent, or some such charge.
After awhile I could remember the charge without reference to the cheat
sheet, and calculated the tax in my head, entering that figure, then
hitting the sales tax key. Today all sales tax is calculated by the
cash register.

"In the end, Dave, in my plan of abolishing both cent and nickel it
would all balance out. Sales up to 4c or 5c would round down, from 5c
to 9c round up to the nearest tenth of a dollar (as the dime would be
the smallest coin). Two Pennsylvania professors studied the subject of
rounding off cash transactions. They analyzed several hundred thousand
cash transactions at convenience stores and found that in the end
rounding off would have little difference. The effect to both buyer
and seller would be insignificant.

"The critic who stated it would be a loss to Americans of some $400
million a year was simply irrational. This would have required 40
billion transactions ending in exactly 5c where the seller always
rounded up. Hogwash!

"Dave asked the effect on the economy. I predict it would be a benefit
because of so many efficiencies (and we will HAVE to do it sometime in
the future, the earlier this is done, the earlier to effect these
economonies). He also surmised the banks – with their stocks of cent
coins would realize an unearned profit – correct. Best part, however,
this did not come out of anyone's pocket!

"The secret would get out, says Dave, and cause problems. It's no
longer a secret, I have been writing about this since last September.
I commented on this to my dentist. "The government won't do it," he
says, "they would rather take some small step." That's why I called
for dramatic action last September (published here in The E-Sylum)."

 ISRAELI ONE–AGORA COIN DEMONETIZED
 esylum_v08n08a13.html

 DICK JOHNSON'S DRAMATIC SOLUTION TO THE RISING COST OF CENTS
 esylum_v09n39a13.html

  Wayne Homren, Editor

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