Warfare has always brought significant changes in a nation’s economy. War costs money and governments search for creative new ways to raise revenue to finance their war efforts.
The United States initially intended to pay for the expenses of the Great War through taxation. This was successful in raising most of the money to pay for the Spanish-American War.
One of the taxes that was imposed for WWI was a four cent tax on the wholesale price of a box of chewing gum. William Wrigley actively fought against the tax to no avail. He was so angered by the tax that he sought to alleviate its effect on merchants by rebating the tax in the form of giving away boxes of gum. The War Tax Rebate Certificate shown above was Wrigley’s way of returning the tax to merchants.
While the additional taxes were effective at raising money for the war, they had an unintended consequence on the American financial system.
Wartime has traditionally resulted in small change shortages due to the hoarding of silver or stockpiling of copper and other metals for the war effort. The WWI taxes also affected the amount of small change in circulation but in an unexpected way.
Most of the taxes were like the chewing gum tax which required small amounts on many different products that were not previously taxed. The additional taxes resulted in uneven amounts being required to pay for items. This left merchants with having to pay out more pennies in change than previously. A shortage of pennies ensued.
While the 1917 penny shortage was a nationwide phenomenon, it was more acute in certain parts of the country and caused merchants to take the extraordinary step of creating a medium to use in the place of one cent coins. The one cent check above issued by the Scranton Clearing House was one attempt at a short term solution.
(Clearing houses were established in most cities to clear checks through the financial system by offsetting balances between banks instead of physically trading cash. They were instrumental in alleviating the cash shortage during the Panics of 1893 and 1907 by issuing clearing house certificates that circulated as money. These will be topics for another day.)
The Economy Grocery Company of Savannah, Georgia made these penny tokens out of paper tags. The owner’s initials appear on the back of the token.
Waldo C. Moore was a banker in Lewisburg, Ohio and a nationally known coin collector. He made these one cent coupons as penny substitutes in 1917. The shield device on the left was the symbol of the US Food Administration.
The last US penny shortage was the result of a spike in copper prices in the mid-1970s. This scrip piece from Schwegmann Brothers super markets in New Orleans was issued as a result. The situation was bad enough in 1974 that some banks paid a premium of up to 20% for pennies (paying $1.20 for $1.00 in pennies) and the Mint Director issued an appeal for Americans to empty their piggy banks and get the coins into circulation.