NY-GOV

This is a gift on so many levels. New York governor David Paterson doesn't seem to have the stones to hike sales and income taxes across the board, so the result is a series of 88 tax increases on services people use every day -- like iTunes downloads and taxis:

The record labels couldn't do it, but New York's Governor wants to make Apple (AAPL) iTunes shoppers pay more than 99 cents per song.

Much of Wall Street is gone now and so are the fat tax revenues it used to earn for New York state.

In order to close a resulting $15.4 billion budget gap, New York Govenor David Paterson wants proposed 88 new fees and taxes.

Among them, an "iPod tax" on the sale of downloaded music and other "digitally delivered entertainment services."

The Daily News reports that the the Governor also wants to tax movie tickets, taxi rides, soda, beer, wine, cigars and massages. Clothes under $110 would also lose their tax exemption. Cable and Satellite TV would become subject to sales tax.

This is eerily reminiscent of the sky high Dinkins-Cuomo hotel occupancy tax rates. When Rudy Giuliani cut them, it sent an immediate signal that New York was open for business, literally and figuratively. Our candidate for governor, and it could be Giuliani, now has a ready-made issue: kill the iTunes tax. And restore a sense in which New York is one state, not an agglomeration of petty interests to be bought off by tax differentials. Comically, Paterson is going to force you to drink diet soda by taxing it less and directing the proceeds to obesity prevention. (No word yet on Albany's obese state budget.)

This is a template that could resonate state-to-state. As Soren has detailed, the states face an unprecented fiscal emergency. And most statehouses are now controlled by Democrats. Many governor's seats will be open -- a lingering impact of the 1994 tidal wave when so many states pressed the reset button, electing and re-electing Republicans. Their 2002 replacements, mostly Democrats but some Republicans, are now largely term-limited.  

This necessitates three things. First, governor's races should be a massive focus of attention in then next two years. Instead of being a sideshow for the next RNC, in their typical DC-centric quest to prop up our numbers in the Senate and House, we should be putting most of our eggs into winning statehouses and salvaging what we can out of the 2010 redistricting cycle in state legislatures.

Second, Republicans at the state level need to get their story straight on tax increases and bailouts. No Republican looking to run statewide in 2010 should have any complicity in "revenue enhancements" or any suggested federal bailout of the states so we can plausibly seen as agents of change and claim a mandate for smaller, more responsible government at the state level.

Third, with out-of-control health care costs being a big driver of spending at the state level, will the GOP put forward a compelling agenda on controlling health care costs? The health care debate at the federal level has focused mostly on the question of access -- but the problems people experience most directly are on different axes: cost and quality. With waste accounting for up to half of U.S. health care spending, it is the states -- as the biggest direct consumers of health care -- that have the biggest incentive to do something about it. Will any of them step up and do something radical?

The Politicker is reporting that Rudy Giuliani and his top political aide met with the GOP state chairman. The topic of Rudy for Governor came up, and Rudy didn't say no.

I asked him if the subject of Giuliani for governor came up, since it's been the subject of some recent speculation.  

"Of course it did," Carbonetti confirmed during a telephone interview yesterday. "But Rudy was like, 'Lets worry about getting through this cycle.'"

Mr. Carbonetti continued: "Joe said, 'I'm with you if you want to run.' You know, the usual stuff." He added, "Rudy said our main focus is winning all the local races we can and getting John McCain elected. And we'll look at all that when the time is right."

I'm a bit of a fan of this idea (in fact, I briefly worked for Rudy last year), but there are a few questions that need answering.

First, what lessons will they learn from the Presidential campaign? This is New York, and Rudy will be more in his element here. Presumably, Rudy will be more direct in attacking David Paterson, something he obstinately refused to do to John McCain, effectively handing him the nomination. Will we see a return to the combative, happy warrior Rudy we saw battling the New York City press corps, or will it be the 2007 wonkish Mr. Congeniality?

And they should probably stop pulling stuff like this. (Update: His team says there will be no strings attached to fundraisers.)

If the lessons of 2007-8 are taken to heart, then this could be Rudy's shot at redemption. His national star dimmed a bit with the Presidential race, but knocking off the corrupt and incompetent Spitzer-Paterson regime and governing successfully would restore the shine and more. And this is the job he probably wants.

Join the Rudy for Governor Facebook Group.