Wall Street generates an outsized share of New York’s tax revenue, so the recent drop in stock prices should worry both Gov. Kathy Hochul and Mayor Eric Adams — even if a recession doesn’t quickly follow.

The securities industry generates 20% of total private wages in the city, despite comprising only 5% of private employment. In all, one out of every nine jobs in every category is either directly or indirectly associated with Wall Street, the state comptroller has estimated.

Last year’s bull market helped fill Albany’s coffers to overflowing with higher taxes on capital gains, investment-firm profits and bonuses. But that wave has now receded.

Stock prices recently dropped well into bear-market territory, more than 20% below peak at the start of the year. For now, securities-industry revenues remain buoyed by the volatility driving trading — but if markets remain in a slump, the trading, too, will dissipate.

The state government built up a $9 billion reserve cushion in fiscal 2022, and Hochul projected another $5 billion surplus in fiscal 2023, which began April 1. But if the bear market is followed soon by a full-blown recession, projected state revenues could easily fall by 20% or more over the next few years. In that case, the state could begin draining, not building, reserves as soon as next spring.

Adams has a tougher challenge. His reserves are smaller than Hochul’s, and there’s considerable uncertainty that the city economy can fully bounce back to pre-pandemic levels. Its pension funds assume an annual 7% return on investments, but plummeting stock prices point to big losses for the pension fund fiscal year ending June 30, which will add hundreds of millions of dollars to out-year budget gaps.

Persisting inflation also will put more direct pressure on other expenditure categories in the service-intensive city budget — especially if municipal unions return to their 1970s and ’80s model of pushing for pay hikes offsetting inflation, as the Manhattan Institute’s Nicole Gelinas has pointed out on these pages.

On the state level, the income-tax structure now is flatter than it was in the 1970s, when stagflation led to “bracket creep” tax hikes. When inflation started to surge in January, the state was already in the process of cutting tax rates on middle-income households, which will offset inflation-driven tax hikes in the near future.

A bigger problem: New York’s state budget depends more heavily than ever on taxes generated in the multimillion-dollar tax brackets, where incomes tend to correlate more closely with financial cycles.

More than 70% of net capital gains in New York flow to residents with incomes of $1 million or more. The capital-gains share of income is larger in New York than in any state, and more disproportionately concentrated among income millionaires. These households, in turn, constitute most of the state’s highest-earning 1% of residents, who now generate well over 40% of total state income taxes.

Last year’s soak-the-rich tax hikes made New York’s combined top state and city income-tax rate the highest in the nation — higher than it’s ever been, given the tax-law change that made it mostly non-deductible for federal purposes. Yet Hochul’s long-term financial plan implicitly assumes New York’s highest earners will all stay put.

That’s by no means a safe assumption — as illustrated by recently released Internal Revenue Service migration data showing a net outflow of 248,387 New York taxpayers and their dependents between 2019 and 2020. Outbound New Yorkers reported average incomes of $114,360 — up 19% from the previous year’s average out-migrant income of $96,104, the largest single annual increase in that measure since the current IRS migration data series began in 2011.

The average income of the 71,845 New Yorkers who headed to Florida, the second-favorite destination for existing Empire State residents, was $156,056 — it reached $728,351 for the 1,893 Manhattan residents who departed to Palm Beach County. By comparison, the average income was $114,025 for New Yorkers heading to New Jersey, the top out-migrant destination.

The stock market will recover sooner or later, producing a new generation of successful investors. A top priority for state and city officials should be to keep them in New York.

E.J. McMahon is an adjunct fellow at the Manhattan Institute and founding senior fellow of the Empire Center.