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New York Decides to Abandon "iPod Tax"

In what WCBS-TV calls a "gigantic flip-flop," New York Governor David Paterson announced that his administration has called off a slew of new taxes aimed at the entertainment industry, including a tax on online music purchases.

Last December, Tom's Guide reported that Gov. Paterson was preparing a budget that would include new taxes on digitally distributed music, as well as movie tickets, cab rides, soda, alcohol, tobacco and cable/satellite television. While Governor Paterson once said "this is where we are," his administration has performed a complete 180 on the matter. "It really has disturbed a lot of New Yorkers," said Gov. Paterson. "They just see it as inconvenient and frustrating that when they try to get to some of their leisure areas that they are taxed as well."

While iPod and iRiver fans in the Empire State are breathing a sigh of relief, New York is still mired in debt. Unofficial projections put the states' deficit at approximately $14 billion. If these new luxury taxes had been imposed, about $1.3 billion in taxes would have been collected in 2009 alone. Furthermore, the elimination of such taxes leaves New York City with $150 million hole to deal with. Such a leak may require cuts in different sector across the city, or new taxes just for the city itself. However, with Federal government bailout money on the way, the Governors' office saw the new taxes as a highly contentious issue and a strain on the middle class. "We have always believed that working families are the backbone of the state," said NY Assembly Speaker Sheldon Silver, "and as such they need relief from the ever-rising cost of living in New York State."

Governor Paterson's decision to abandon taxes on such leisure items will probably do better by the state of New York in the long run. When such taxes were initially proposed, many in the state legislature feared it would drive New Yorkers to shop in New Jersey, leaving parts of New York (specifically New York City) in quite a predicament. While downloadable content is safe for now, New York does draw revenue from other web-based sources, including its sales tax on websites like Amazon.