One way to articulate the looming budget crisis is to say that New York’s wealthy have sneezed and the state and city are catching cold. For the collapse in tax revenues stems from the fact that New York is perilously mortgaged to the rich, a matter these columns first discussed under the headline “Mortgaged to the Rich.” Our state’s reliance on its income tax — which also taxes income from capital gains — means that fluctuations on Wall Street, and in the fortunes of the Empire State’s wealthiest citizens, have an outsized impact on our tax coffers. The collapse of the stock market has translated into a significant fiscal hit. According to a report issued last month by the Nelson A. Rockefeller Institute of Government at Albany, personal income tax collections, which make up almost two-thirds of state revenues, have fallen by 26.8% in April, May, and June compared with the same period last year.

The report, titled “State Tax Revenue Decline Accelerates,” makes it clear that this decline in income tax revenues is largely attributable to the wealthier sector rather than a broad-based economic decline. Income tax withholding in the April-June period was down but 1.4% compared to last year. Income tax withholding covers, for the most part, the ordinary working stiffs who have taxes deducted from every paycheck. The big revenue drop instead has come in estimated taxes — those taxes that reflect the profits on investment, which are often made by those invested in the stock market and proprietors of businesses. Among these wealthy types, revenues from estimated tax payments are down 31.1%.

“This is why fiscal conservatives fight so hard against income tax issues in states that don’t have them,” said E.J. McMahon, a fiscal policy specialist at the Manhattan Institute. The government, Mr. McMahon points out, spends whatever it has. Thus, in a boom such as the one we just had, revenues skyrocket — and so does spending. But when the revenues go away, as they now have, the spending doesn’t. Politically, it is almost impossible to cut back programs simply on account of the small matter of the money no longer being there to pay for them. This can be especially difficult, Mr. McMahon says, when tax revenues resemble a rollercoaster: “When you tie yourself to an income tax you tie yourself to the income cycle, and especially in New York, you tie yourself to the market cycle.”

So New York will be in for a bumpy ride. The chief economist for the Securities Industry Association, Frank Fernandez, is quoted by the New York Times as saying that “variable compensation,” or bonuses, are likely to come in between 23% to 30% below last year’s low number. With the market down about 20% for the year, capital gains look likely to be down significantly, too. This leaves New York mortgaged to the wealthiest 3% of taxpayers, for those who make over $200,000 pay over 40% of all income taxes. The solution isn’t to raise taxes on the middle class. The state’s highest rate of 6.85% already kicks in for those married couples making above $40,000, and single payers making as little as $20,000. Better, Mr. McMahon suggests, for the state to exempt capital gains from the income tax altogether. It would make the budget less dependent on the stock market — our coffers not as flush during the booms, but spending constrained during the busts. It would attract more capital and more investment to the state. Then when the wealthy sneeze, one can say gesundheit.