ALBANY – With his approval ratings at an all-time low, Gov. Paterson announced today that he will drop the so-called “iTunes” tax and other surcharges as potential revenue generators – and plans to use money from President Obama’s stimulus package to help close the state’s growing deficit.

In a bid to wipe out a $14 billion budget gap, Paterson had called for 88 new fees last December – including taxing the sale of downloaded music and other “digitally delivered entertainment services.”

Movie tickets, taxi rides, soda, beer, wine, cigars, massages, health club memberships and Internet porn would have also been taxed under Paterson’s controversial proposal.

“The proposed tax increases we are eliminating today were only put forward as a last resort when the deficit ballooned to an unprecedented level,” said Paterson.

The fees and taxes first proposed by Paterson would have generated about $1.3 billion.

The 2009-10 budget has an April 1 deadline.

Paterson said that given the “enhanced federal funding,” it is the state’s “highest priority to provide targeted relief to those who need it most during this economic crisis — average New Yorkers struggling to make ends meet.”