"Change is never easy, but it is the only way we can put New York back on the road toward fiscal and economic recovery."
-- Gov. David Paterson
Four months ago, I donned my best suit and snazziest heels to attend "Eyes on the Future," a local economic summit held in a college gymnasium that smelled vaguely of feet.
It was here that hundreds of Rochester, NY business execs and entrepreneurs gathered to whine into their Tim Horton's about the dreadful state of the Upstate economy. No jobs. Vanishing credit. Young college grads fleeing the state in record numbers. It was a real sobfest. The panelists on stage prattled on and on about non-issues like "attracting Millennial workers" and "how to better brand Rochester," all the while studiously avoiding the real elephant in the room: [i]The economy sucks because we made it so. The only way to make it better is to tighten our belts.[/i] To be fair, this is not a message that we New Yorkers are used to hearing.
Which is why I was so impressed with Governor David Paterson, who dropped by that day to give a surprise, impromptu speech. The same Governor Paterson who just declared war on the geeks.
In his brisk, toneless presentation, in which he barely paused for breath or punctuation, Gov. Paterson doled out some pretty rough justice, calling for immediate, drastic and specific cuts to government spending. He talked of change and tough times, and the need to face problems head-on, decisively. He even dropped the R-bomb — "recession" —months before most government employees could curl their lower lips to make the “R.” (One businesswoman on stage physically cringed when he said it.) It was just like watching John Wayne. If John Wayne were a lawyer from Brooklyn.
I was startled. Somehow — it could only have been by mistake — we New Yorkers had acquired a frank, no-nonsense politician in our highest office. Someone who might actually understand what it takes to revitalize a dying economy.
It’s important to understand just how Mr.-Wayne-Goes-To-Albany Paterson seems. Because otherwise, it won’t make any sense that I’m so pissed about his new budget proposal.
On Tuesday, the governor unveiled his ideas on how to close the state's $15.4 billion budget gap. It's been called a "doomsday proposal," one that Paterson himself said contains "extreme measures."
By "extreme measures," I assume he means "anti-intellectual, nickel-and-dime sabotage."
Gov. Paterson's budget is a love letter to King George III. He suggests raising taxes on wine, beer and cigars; removing caps on the already punishing gas tax; and adding new taxes on everything from movie tickets to baseball games to massages. He even boldly proposed a 21st century version of the Sugar Tax: an 18% tax on sodas and sugary juices, which he claims will cut down on childhood obesity.
Putting aside my moral indignation of having the State help me decide what to eat, what bothers me most are Paterson's new proposals on online transactions. For starters, Paterson wants to impose sales tax on all digitally downloaded products, including "prewritten software, digital audio, audio-visual and text files, digital photographs, games and other electronically-delivered entertainment services."
In other words, almost all the media I consume.
In addition, he wants to require out-of-state companies who do business in New York to form a "nexus" here, through which they'll collect state sales tax. This, he claims, will prevent a company from "avoiding charging sales and use tax on Internet purchases by creating independent but affiliated out-of-state entities to make those sales."
Meaning, I can only buy from State-approved Gamestops.
Setting aside the question of enforcement — I'd make a scary lawyer, and an even scarier cop — the new provisions raise several red flags.
Charging sales tax on downloadable content may seem like a great idea on paper, but I worry the move may encourage even more piracy over time. A 4% tax on your iTunes purchase may not seem like much, but we've become so psychologically attached to the $.99 price point that exceeding that by any amount — even just by four cents — will seem an outrage, or worse, a personal dig at a generation that chooses to purchase its media digitally, rather than physically. Nevermind that physical brick-and-mortars have been charging sales tax for decades. The very novelty of the tax will encourage piracy, at least in the short term, perhaps as a sort of protest. (I know I'd feel much less guilty bilking the government instead of a game developer.)
Normally, I wouldn't worry about the handful of people so cheap that they can't abide paying an extra four cents for a song, or an extra $2.40 on a next-gen game. But remember the main justification behind those vicious copy protection schemes wrecking up our hardware? [i]"We must do something about piracy.” [/i]What if there's a sudden, measurable influx of new pirates on the scene? Oh the fertile grounds of next-gen rootkits!
I'm also worried about that second proposal mandating "nexuses." Essentially, that means forcing companies — even independent, one-person operations — to create a new business entity, just to do business in New York.
Obviously the Wal-Marts and Microsofts and probably even Valve will comply and continue to offer goods to New Yorkers. But what about the smaller guys? Will the increased red tape (and presumably additional expense) diminish the incentive to do business in New York altogether? Does this mean that consumers will conceivably be unable to purchase games from Stardock, or some small indie developer living off paypal donations, simply because those vendors don't want more hassle?
Let me be clear: If Paterson takes away my Stardock, I'll be heading up the million-Kat march on Albany myself. Me and my 999,999 Facebook friends.
The crippling irony here is that one of the major complaints Gov. Paterson addressed in his speech — the flight of young college grads, and thus the loss of an entire generation of economic growth — is the very thing this budget proposal will accelerate.
Our brain-drain isn’t really news. New York has struggled with keeping the smart kids here for a long time. Students flock to the state to get educated, but few ever stay. It's a particularly bad problem here in Rochester, where the slowly sinking Kodak and Xerox offer even less incentive than ever for young people to stick around.
So what does Paterson suggest? Tax the very goods that appeal most to the younger, tech-savvy little engines of commerce he’s trying to court. Higher alcohol and cigarette taxes. An obesity tax for soda. New taxes on sporting events and movie tickets. And, of course, taxes on online content. He’s a one man wrecking-crew headed straight for Saturday night.
It's not that young people will leave New York simply because there's a 4% tax on their World of Warcraft subscriptions. Rather, it's the cumulative effect. They'll have to pay so much more for every little aspect of their daily lives — why should young people stick around when it seems the governor is singling their generation out for special treatment? (I noticed there were no proposed taxes on hearing aids or Metamucil.)
Look, I'm not naïve. I know that, realistically, our tax structure must be updated for the 21st century. As commerce spreads from the brick-and-mortar store to the virtual marketplace, so too should the ways society funds its communities evolve.
But is this really the best idea we can come up with?
This isn't the John Wayne I saw four months ago, swaggering across a stage and rustling whiny businessmen into line with tough talk about budget cuts. Looking back, I'm not sure who that guy was.
I mean, sure: The economy is tough. But it's even tougher when you're stupid.