Proposed digital entertainment tax would affect all sorts of digital download services including iTunes

Large manufacturers in the automotive and electronics industry aren’t alone in having money problems right now. Alongside these firms in dire economic straights are consumers and even state and local governments.

New York State Governor David Paterson is looking at a massive $15.4 billion deficit in the state budget. To balance the budget the governor reportedly plans to raise some taxes and eliminate some jobs.

One of the most controversial taxes on the budget agenda would see New York residents paying more for digital entertainment including downloads from iTunes and other digital services like eBooks for Amazon's popular Kindle reader.

The state would charge a tax on digitally delivered entertainment services reports CNET News. Other than adding to the cost of music from iTunes, the tax would also affect things like tickets to sporting events, movie tickets, taxi rides, satellite TV, and satellite radio.

Patterson told, "We're going to have to take some extreme measures." The so-called iPod Tax isn’t the only method on the agenda for increased tax revenues New York residents are facing. The plan would cut state aid to schools by $689 million, cut healthcare benefits by $3.5 billion, and eliminate 521 state workers and seven state agencies.

Patterson continued saying, "This is where we are. Maybe we should have thought about this when we were depending on what we thought was inexhaustive collections of taxes from Wall Street - and now those taxes have fallen off a cliff."

The proposed budget still needs approval by the state legislature before the proposed taxes go into effect.

"We basically took a look at this situation and said, this is bullshit." -- Newegg Chief Legal Officer Lee Cheng's take on patent troll Soverain
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