ALBANY - Responding to outrage in the public and legislature, Gov. David A. Paterson yesterday dropped $1.3 billion in proposed taxes on some goods and services, such as sugary soda, movie tickets, haircuts, music downloads and cable television.

He said the levies were no longer needed to help close next year's $14-billion budget deficit because of federal stimulus money. Some of the $11 billion sent from Washington to offset New York's Medicaid costs will substitute for the controversial taxes, he said.

Paterson also signaled a willingness to eliminate dozens of additional taxes - valued at $2.8 billion - contained in his spending plan for 2009-10. The proposed levies include new charges for license plates and filing paper income-tax returns, lifting the cap on gasoline taxes and higher fees for car rentals.

"Nobody likes to tax people. ... We got there because we couldn't find any other place to trim or cut spending," Paterson said. "Now that enhanced federal funding is available, our highest priority must be to provide targeted relief to ... average New Yorkers struggling to make ends meet."

Among the rescinded proposals was scrapping the sales-tax exemption on clothing and shoe purchases valued at less than $110. There also will be no limit on the tax exemption for home improvements.

Still, the initiative that drew the most criticism was an 18-percent tax on nondiet soda. It was dubbed the "fat tax" because $404 million in proceeds were to go toward combating childhood obesity.

Merchants and others praised the death of proposed taxes on health club memberships, manicures, satellite radio, skiing, bowling and tickets to sporting events. "The economy moves when consumers and businesses spend," said James R. Sherin of the Retail Council of New York State.

However, hospitals and unions representing health care workers questioned the legality of the move, saying the stimulus money was meant for Medicaid, which insures the poor.

"Today's announcement is clearly out of step with President [Barack] Obama's intent," said Daniel Sisto of the Healthcare Association.

Paterson shot back that Obama and Congress gave states discretion over use of the Medicaid dollars, which span 27 months.

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Separately yesterday, Assembly Speaker Sheldon Silver (D- Manhattan) and State Senate Majority Leader Malcolm Smith (D- St. Albans) said they would dispense with each legislative house adopting a budget proposal and then negotiating with the governor. They said they would try to reach a budget agreement before the April 1 deadline.

However, Senate Minority Leader Dean Skelos (R- Rockville Centre) said the move would eliminate required conference committees where rank-and-file lawmakers have input in budget making. He said, "It means there are an awful lot of people excluded from the process ... I believe they are violating the law."


Gov. David A. Paterson has withdrawn $1.3 billion of $4.1 billion in taxes that he proposed for next year.


Eliminate the sales-tax exemption on purchases of clothing and shoes less than $110

Create 18-percent tax on sugary soda to fight obesity

Add a sales tax on television and radio provided by cable or satellite

Limit the tax exemption for home improvements

Tax personal services such as haircuts, manicures, massages and health club memberships

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Tax credit rating and reporting services

Add a sales tax on entertainment such as movie, concert and theater tickets, golf, skiing and bowling

Create a sales tax on music, software, pornography and other material downloaded from the Internet

Add a sales tax on store coupons used for purchases


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Repeal the cap on gasoline taxes

Raise the sales tax on luxury goods

Increase the tax on car rentals

Increase fees for motor vehicle registration and new license plates

Create a marine fishing license

Raise taxes on medical insurance

Add a fee for filing paper income-tax forms

- Compiled by Albany bureau chief James T. Madore