The E-Sylum:  Volume 10, Number 26, July 1, 2007, Article 19

HOUSTON ARTICLE DISCUSSES MILLS

Dick Johnson writes: "Leon Hale, who writes for the Houston Chronicle,
received an Oklahoma mill token in the mail from one of his readers this
week. This was the first mill he had ever seen. His June 26, 2007 column
recounted this event plus a remembered story of saving cents in his
youth, each of which his family told him was worth 10 mills.

"Leon's correspondent stated that a mill in 1940 was worth more than a
cent today. Boy, is this ever an invitation to tout my plan to abolish
the cent coin!  Not only is the cost of the metal composition in each
cent coin wavering above the value of the cent denomination, but his
correspondent is correct in that the purchasing power of the cent has
diminished.

"What's more important, we don't need pennies for a dynamic American
economy anymore. And that's good. Our economy has advanced so far that
a dime can be our smallest denomination coin.

"Thomas Jefferson invented our coin denominations -- cent, dime, dollar,
eagle -- and of course, the mill. But we did not need a coin valued at
one mill, even in 1792 when the first U.S. coins were struck. The mill
was a money of account then, as it still is a money of account now. Yes,
we did have a half cent then, but it was abolished in 1857 for the same
reasons the cents are destined to be abolished today -- the rising cost
of the metal in the coin and the increase in the American economy.

"As E-Sylum readers may remember I suggested the Treasury Department
abolish both the cent and five-cent nickel, and revalue all these coins
in circulation to ten cents. This would prohibit any coin shortage that
would result from inaction or any other proposed solutions. This plan
was outlined in the September 26, 2006 E-Sylum and the March 26, 2007
editorial in Coin World.

"Independently, a Federal Reserve Bank economist, Francois R. Velde (an
E-Sylum subscriber!), came to the same conclusion to revalue the coins,
but he called his plan "rebasing" and he wanted to revalue the cent only.
He based his conclusion after an exhaustive scholarly study, and published
a book with co-author Thomas J. Sargent on "The Big Problem of Small
Change" (published by Princeton University Press). He said it better than
I did. He publish his plan in the February 2007 Chicago Fed Letter "What's
A Penny (or a Nickel) Really Worth?" See:
www.chicagofed.org/publications/fedletter/cflfebruary2007_235a.pdfe

"As for the mill that Leon Hale received in the mail, this was struck
here in Connecticut at the Scovill Manufacturing Company, in aluminum,
as were most of the metal tax tokens for other states. Sales taxes were
enacted in the Great Depression and tokens were ordered to facilitate
collecting these taxes when citizens really had to pinch their pennies.

"At first, states employed a variety of paper receipts and cardboard
tokens to collect these fractions of a cent. As a teenager I visited a
plant in Kansas City that normally made the cardboard caps that fit on
glass milk bottles. They manufactured the first Missouri Mills of
cardboard on the same machinery that made the milk bottle lids!

"State tax officials realized the sales tax would be permanent (when is
a tax ever not permanent?) they turned to metal tokens. But when aluminum
became a war metal in the early 1940s, states had to have their mills
made of something else. Plastic was an obvious answer. So decades later
sales tax tokens are a delight for numismatists to collect for their
variety of compositions, sizes, center holes, and different colors of
the plastic tokens.

"Those states that had a sales tax but did not issue mill tokens used a
tax schedule, rounding off and collecting only whole cents. In the future
when Americans abolish the cent and nickel -- which we must do at some
time! -- we will do the same, but round off to the nearest dime. To
critics who say this would be more costly need only look back to the
success of those wartime years when sales tax charges were rounded off.
That plan is still in use today, a half century later, to collect sales
tax. Today cash registers automatically round off the tax to the nearest
cent.

"That Oklahoma tax token is an artifact of the past, but a precursor
of something yet to come, a change for America's small change."

To read Leon Hale's published article, see: Full Story

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

  Wayne Homren, Editor

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