The Proposed "iPod Tax" Isn't Music to New Yorkers' Ears

(MoneyWatch)  There's plenty of pain to go around when it comes to the austerity budget proposed by New York Governor David A. Paterson yesterday, but one line-item has caught the attention of media junkies everywhere: a plan to levy a 4 percent tax on digital downloads.

In fact, the proposed levy already has a name: the iPod tax. But it doesn't stop with charging consumers a lofty $1.03 to buy a song from iTunes -- the governor is also examining whether to begin taxing and/or increase taxes on other forms of entertainment such as movies and cable TV.

Every tax is worth complaining about, of course. In this instance, we are bound to hear protests centering around several themes, probably voiced most loudly by the many media executives who call New York City home. One protest will point out that consumers spend more time at home during a recession, so maybe it would be nice to give them a little cheap entertainment to get them through until the time when their credit card limits go up gain. Another is that the media and technology companies which provide entertainment are already being hit hard by the recession, so taxing another one of their revenue streams just heightens their pain.

Don't expect either argument to win favor with the state government. It has to close a $15.4 billion budget gap and in that situation about the only thing that isn't up for scrutiny is taxing air and water. With that thought, excuse me while I cross state lines to download the new remaster version of Led Zeppelin IV.