New hike can target digital music, services

New York Gov. David Paterson has unveiled an austerity budget plan designed to pull his state out of the hole, and one of its many targets is “entertainment-related consumer spending.”

Paterson proposes, along with severe budget cuts, dozens of new or increased taxes on everything from music downloads (a new 4% tax) to movie tickets (another new 4%) to sugary drinks (a whopping 18% increase, likely to affect multiplex concessions). New York has largely declined to tax entertainment spending in the past, but Paterson proposes to end that tradition with new levies on cable and satellite TV, radio and sporting events, among others.

The taxes are extremely comprehensive: one of the largest concerns addressed in the 151-page briefing book was the closing of loopholes, notably the “digital property taxation loophole,” meaning the untaxed status of digital media downloads from sites like iTunes.

Other laws changed to eliminate technicalities include an expanded definition of residence in New York (increasing the number of people who owe state income tax), and a new requirement that in-state retailers charge NY sales tax whether they sell product via an out-of-state internet proxy or not.

The budget would be New York’s biggest tax increase ever, and is estimated to provide an extra $627 million to local governments in sales taxes alone, though the total plan still boosts spending slightly overall. Orgs like the National Association of Theater Owners are incensed, but Paterson says his hand has been forced: the state is laboring under the largest deficit in its history — $15.4 billion — and the fiscal year ends in March.

Along with the tax hikes, the governor’s outlined reductions have slashed funding to nearly every government agency, cutting $700 million out of the education budget and angering teachers’ unions, among others. Arts and entertainment orgs wouldn’t escape those reductions unscathed, either: earmarked funds for New York State Council on the Arts are cut by $7 million in the budget, bringing the total down 15% to $38.9 million.

NYSCA, which already had its budget trimmed by 10% earlier this year, provides funding to many of Gotham’s nonprofit orgs, from the Film Society of Lincoln Center to the Anthology Film Archives and the Tribeca Film Festival. In many cases, recipient orgs count on NYSCA for operating budget support.

“We have lived beyond our means,” the governor told Albany lawmakers. Paterson admitted that “adjusting out state budget to reflect this new fiscal environment will be an extraordinary challenge,” and that the plan sought “shared sacrifice.” The city, too, is scrambling to shoulder its own budgetary burden: Wednesday, Gotham lawmakers approved a similarly Spartan plan for the MTA that increases fares and cuts service.

Not everyone was on board with Paterson’s teamwork ethos — New York civil service employees, whose pensions will be cut by the plan, lashed out at the governor’s proposal.

“The middle class will have to pay more and get less while the wealthiest New Yorkers slide by under the Governor’s proposal,” said Civil Service Employees Association prexy Danny Donohue. “There is no sharing of the sacrifice here — it’s working people getting stuck with the bill.”

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