New York Governor David Paterson's December tax proposal that would see the state nickel and diming downloadable content has been scrapped in favor of large amounts of federal stimulus money.

Paterson's proposal, issued in December, included a section titled "Close Digital Property Taxation Loophole", which would impose taxes on all digitally-delivered items, including iPod songs, digital movie rentals, and video game content. In a press conference in Albany yesterday, the governor announced that that particular provision had been removed, along with taxes on clothing over $100, haircuts, non-diet soda, movie tickets, and gasoline priced over $2.

According to Paterson, the taxes were viewed as "inconvenient and frustrating" by New Yorkers, who viewed them as a direct attack on their leisure activities, and the one thing no one wants to deal with is inconvenienced and frustrated New Yorkers.

New York skips Internet, soda and other tax hikes [Reuters]

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