Which key sector of New York’s economy has experienced a deep slump that is largely to blame for recent state and city revenue shortfalls?

And which sector of New York’s economy will benefit the most from President Bush’s new tax proposal?

The answer to both questions, of course, is the securities industry.

By seeking the elimination of federal income taxes on shareholder dividends, coupled with faster-than-scheduled cuts in marginal income tax rates, Bush is offering a massive boost to the Empire State, and to New York City in particular.

The president’s plan will deliver billions of dollars a year in permanent tax relief to New Yorkers and encourage investors all over America to invest tens of billions more in Wall Street. Indeed, dollar for dollar, the plan probably does more for New York than for any other state.

Too bad our U.S. senators don’t seem to get it. Within days of the president’s economic address, Chuck Schumer and Hillary Clinton were criticizing Bush’s tax package. Instead, the two Democrats apparently prefer their party’s much more limited stimulus plan, which includes a $30 billion dose of temporary budget relief for state governments.

Before they set their feet in concrete on this issue, Sens. Schumer and Clinton need to recognize that:

* The president’s proposal would amount to a fertility treatment for the goose that lays New York government’s golden eggs.

If Bush’s economic advisers are correct in projecting that the elimination of dividend taxes will increase stock values by 10 percent, the resulting jump in tax revenues from capital gains, securities-industry profits and investment-banker bonuses alone will offset much of any potential drop in state taxes on dividends (a fiscal red herring that Schumer has cited in criticizing the Bush plan).

Given the economic-multiplier effects usually associated with securities firms in New York, the overall upside would be enough to swamp any revenue downside associated with the investor tax break.

* New York is home not only to the stock market, but to more individual shareholders with more dividend income than any other state except California. According the latest IRS data, the Empire State accounts for just 6.6 percent of the nation’s individual income-tax filers, but generates more than 8.5 percent of the dividend income reported on federal tax returns. More than 30 percent of New York tax filers receive dividends, compared to 26 percent in the rest of the country.

* Further tax savings for all New Yorkers will come from the president’s plans to 1) speed up tax-rate cuts now scheduled to take effective in 2004-06, 2) increase the child tax credit, and 3) reduce the tax code’s “marriage penalty” on working couples. For a typical family of four in the New York metro area, these changes will translate into immediate savings of more than $1,100 a year.

For the state as a whole, the plan represents more than $5 billion in added direct tax relief this year, on top of the $7 billion New Yorkers were already set to receive under the 2001 tax-cut law.

Why aren’t New York senators embracing a set of proposals that so obviously favor New York? It’s not just the usual partisan posturing, but also a basic philosophical difference between Bush and his critics in the political establishments of both major parties.

The president wants to promote long-term economic growth by permanently returning more money directly to taxpayers, who will spend, save and invest it in the private sector. Schumer and Mrs. Clinton prefer to funnel more money to politicians in Albany (and other state capitals) – who, if history is any guide, will simply use it to postpone tough budget decisions for another year.

Clearly, the White House will need to negotiate this proposal with congressional Democrats – particularly in the Senate – before anything is enacted. Which leads to one last question: When the horse-trading is done, will New York’s senators help deliver what New York really needs most?