Public’s Love-Hate Feelings Spark New Anti-Penny Move : Currency: Merchants need them to cash checks and make change. But banks make it hard for hoarders to redeem red cents for folding green.

The Semass garbage treatment plant in Massachusetts each day sifts through its incinerator ashes for $1,000 in change, most of it in pennies.

To replenish its penny supply when the Federal Reserve Bank could not, Key Bank of New York last summer offered 55 cents to anyone who brought in 50 pennies. The 10% premium coaxed about 5 million pennies out of piggy banks and gallon jugs in two weeks.

That inflation has made the cent coin (penny is slang derived from “pence”) a worthless pain in the pocketbook is no surprise to most Americans. It’s the penny paradox that remains a mystery: Few want them, some have too many and most wish they had one when the cash register rings up $50.01.

Entrenched as it is, the cycle defies the problems now multiplying as fast as the 202-year-old coins, which today cost 0.7 of a cent each to make. The U.S. Mint will make one penny in its 1995 fiscal year for every one it made from October, 1993, to September, 1994--and 340 million more.

Stacked one on top of another, the 13.8 billion pennies minted this year would make 48,000 stacks as tall as the Sears Tower in Abraham Lincoln’s home state of Illinois, with $700,000 left over in change. About 70% of the U.S. Mint’s coin-making capacity is tied up in pennies. Meanwhile, as few as 1 billion quarters are struck each year, since most stay in circulation.

Even the American Bankers Assn., which opposed eliminating the penny in a 1990 legislative debate, isn’t sure cents make sense anymore. “It’s perfectly clear that the penny is an organizational burden,” said Kawika Daguio, a representative of the ABA in Washington. “A horrific burden.”

Penny propagation is even making the United States that rarest of sovereign governments to mint a coin refused by its own agents. The New Jersey Turnpike Authority requires drivers to count out five pennies at a time to toll-takers, who then repeat the process. If the blaring horns of impatient drivers don’t discourage penny-ante payments, Turnpike Authority officials admit, toll-takers sometimes simply refuse them.

That kind of unwillingness to circulate the penny forces the mint to make more for distribution by banks, which aren’t much more cooperative. While merchants need them to cash checks and make change, banks make it hard for hoarders to redeem red cents for folding green.

Some banks, even those with automatic counting machines, expect 50-count rolls and a branch account, in case a few were dropped in hand-wrapping. As legal tender, pennies are acceptable payment for all debts, mint officials said, but businesses aren’t required to take them.

Public distaste prompts the occasional fight to get rid of the one-cent coin. The last occurred in 1990, when Congress considered legislation aimed at killing it. Now, many experts expect the coin to die of neglect.

“I think the penny is on its way out,” said J.P. Martin, a numismatist at the American Numismatic Assn. in Colorado Springs, Colo. Low-denomination coins have been dying since the Roman Empire, he said.

The penny isn’t the first U.S. coin to become so unpopular. The half-cent was discontinued in 1857, when the U.S. Mint still reported directly to the president. Jurisdiction for the money factory moved to the Treasury Department in 1873, the same year it stopped making 2-cent and 3-cent pieces.

Coins typically get smaller before they die, Martin said. The penny’s fate may have been sealed when the Mint shrank it in the 1800s, and debased it in 1982 by making it mostly out of cheaper zinc instead of copper. “The copper plating will wear off, and pennies will turn black and disgusting,” he said.

For the first U.S. circulated coin graced with a President’s visage, say sentimental collectors, that’s a sad fate. The penny was seldom pure copper, though, at times containing measures of aluminum, tin, bronze and nickel. Plastic was once considered.

During the World War II shortages, enough copper to make 1.25 million mortar shells was freed up by substituting zinc-coated steel pennies. Preceded by Indian Head coins modeled after the designer’s head-dressed Caucasian daughter, the Lincoln Head debuted in 1909 and was backed by the Lincoln Memorial in 1959. More than 300 billion of today’s version have been minted since.

Penny proponents, including the Washington-based Americans for Common Cents, say abolishing the penny would create what amounts to a tax on the poor. Rounding the price on retail purchases could create a small discount or, as Pennsylvania State University economics professor Raymond Lombra argues, a “surprisingly large” regressive tax on the poor.

By calculating thousands of product combinations, Lombra estimated that the total price at the checkout more often ends in a number greater than five, forcing the customer to round up. Such rounding would cost consumers $1.5 billion a year, he said.

Foes argue that pennies aren’t worth the trouble businesses have counting them. Before he was vice chairman of the Federal Reserve Board, Alan Blinder came out against the penny in a 1987 Business Week column. Counting pennies costs “several hundred million hours” each year, he wrote.

As for inflation and a regressive tax that might follow the penny’s demise, Blinder said merchants would be more likely to round $39.99 to $39.95 than to $40, for example, to maintain the illusion of a lower price. That kind of rounding would actually be disinflationary, he argued, proposing collectors have free reign to hoard pennies before the government demonetized them.

Coin enthusiasts would appreciate Blinder’s method this year. They’re already buying 1995 pennies by the hundred, trying to find those with a rare defect that left a double image in the word “Liberty” and in the hair on the back of Lincoln’s head.

Coin dealers are paying as much as $250 for the defective pennies. Not bad for a coin no one wants.