New York skips Internet, soda and other tax hikes

"We're coming up with money from the federal stimulus money for what we're taking off the table today," Paterson said at an Albany news conference joined by state senate and assembly leaders.

The Democratic governor had hoped to raise $1.3 billion to help shut the state's budget deficit with nearly 140 tax hikes. Proposed tax increases on movie tickets, hair cuts and gasoline if it cost more than $2 a gallon were also eliminated, Paterson said.

Many New Yorkers had viewed the proposed taxes as an attack on their leisure activities. "They see it as inconvenient and frustrating," said Paterson.