Tax Madness! Beer, Movies, Taxis, iPods All Hit

Gov. David Paterson's first state budget threatens to impact just about every New Yorker. Even those online.

Paterson proposed Tuesday a 2009-10 budget that would increase spending by 1.1 percent, or $1.3 billion, to create a $121.1 billion spending plan. Much of the growth is revenue from 88 new or higher fees and will hit New Yorkers in many areas, from downloading music to sipping drinks to fishing.

One of the proposed hikes is a so-called "iPod tax," which would tax the sale of downloaded music and other "digitally delivered entertainment services" by 4 percent. There also would be higher taxes on gas, taxi rides, cable and satellite TV service, cigars, beer, movie and sports tickets, and health spa visits, to name a few items.

Paterson seems to be fighting both obesity and budget deficits with a proposal for an 18 percent tax on soda and other sugary drinks containing less than 70 percent real fruit juice.

"People don't really realize the amount of calories they're ingesting through liquids," said Joe Baker acting deputy secretary for Health and Human Services to the governor. "They say, 'Oh, it's just a drink.'"

The idea is to discourage consumption of high-caloric beverages — health officials estimate a 5 percent drop — and to raise $404 million in fiscal year 2009-2010 toward the state's multibillion dollar budget gap. Paterson said the proposal would raise $539 million in 2010-2011.

The American Beverage Association opposes the tax, saying it would most harm the middle class. The group also argued that it doesn't make sense to single out a single food product as the cause for obesity.

Albany is an extraordinary place, where a "cut" is when funding increases less than requested, and where lawmakers who are well financed by special interest groups including powerful public employee unions can send an overly aggressive governor crashing with his budget proposal. Into that maw, Paterson followed governors George Pataki and Eliot Spitzer, who at different times also called for hard fiscal choices, only to be bowled over the Legislature.

And there may be reason for concern now. After months of accurately forecasting economic calamity and forcefully warning of deep cuts to previously untouchable programs, Paterson drew up a budget that falls short of his rhetoric, holding the line instead of redrawing it.

Still, given the political reality, some see Paterson as taking a realistic step to correcting New York state government's penchant for overspending and overtaxing.

"It's a huge challenge," said Elizabeth Lynam of the independent Citizens Budget Commission. "I think it's a picture of broad-based sacrifice for all New Yorkers across the state to pitch in."

Name an area, and you'll likely see a pinch. And the bruise will linger for at least the next two or three years as Albany tries to bring spending in line with revenues.

"Unfortunately, we have lived beyond our means," Paterson said in his budget address Tuesday. "We have made too many promises and unfortunately have asked for two few sacrifices. We are to have to change."

He started hearing the grumbling minutes after his speech. Lawmakers said he was nickel-and-diming the middle class with nuisance fees.

"It still will be very hard. Advocates will still advocate like it's 1998," he said, using the term lobbyists prefer to be called.

That's wrong, he said, and he promises to make this budget his stand.

"New York is not alone, but if the United States is the epicenter of a global economic meltdown, New York is certainly the focus of economic woe," Paterson said. "New York, which led the country in identifying this crisis, now can come together to help our neighbors learn how to address it."

He also isn't embracing the Assembly Democrats' proposal to increase the income tax rate on New Yorkers who earn $1 million or more a year. Why? There aren't as many of them after Wall Street's meltdown. And the ones who are still around pulling in that kind of paycheck are the New Yorkers most able to move to New Jersey or Connecticut or elsewhere, bringing their employees with them.

Paterson sees that as a cause-and-effect that's not worth the gamble, and many economists agree.

"This budget is by no means perfect and we welcome critique," Paterson told lawmakers and lobbyists, then added a stern warning: "But endless ridicule of a budget that is imperfect, yet purposeful, is not helping this administration."

Copyright Associated Press

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