New York Taxpayers – 1 Governor David Paterson – 0

It looks like New York’s taxpayers win this round.

Gov. David Paterson and legislative leaders have dropped $1.3 billion in proposed nuisance tax and fee hikes from the budget a move paid for by federal stimulus cash.

The new development in the budget process was announced Wednesday morning by the governor, Assembly Speaker Sheldon Silver and Senate Majority Leader Malcolm Smith.

The nuisance taxes to be eliminated include the so-called “obesity tax” on sugary soft drinks, taxes on entertainment (proposed for movie, concert, circus tickets), a tax on “personal services” including gym memberships, and what had been dubbed the “iTunes tax” on digital downloads.

This announcement appears to be driven out of the governor’s office, as opposed to the legislative leaders. The governor’s approval ratings in a number of recent polls have plunged as the one-year anniversary of his rise to the office approaches.

What this means is that with $1.3 billion spent down from the stimulus, and $1.3 in additional revenue off the table, legislative leaders must now find a way to close the budget deficit with $2.6 billion less to negotiate with.

Here’s a novel idea to close the budget deficit: Cut spending! It works every time.