Now that they control both houses of the New York State Legislature, Democrats in Albany are reportedly preparing to raise the state income tax on high-income New Yorkers to help plug a $15 billion budget gap.

State Sen. Eric Schneiderman (D-Manhattan), who is leading the tax-hike charge, justifies the move on the grounds that “for the last 30 years we’ve been shifting the tax burden from the wealthy to middle-class families.”

In fact, just the opposite is true.

The wealthiest 1% of New York taxpayers generated 41% of all state income taxes in 2007—up from 30% in 1996, when the marginal tax rate was higher. Even with the steep economic downturn, the share of taxes paid by the wealthiest New Yorkers this year will be higher than it was in the mid-1990s.

And that’s just the problem. New York’s growing dependence on high-income taxpayers is a major reason why we’re in a deeper fiscal hole than any state except California (which is similarly dependent on taxes paid by wealthy households).

The taxes generated by superprofitable (and overleveraged) Wall Street investment banks fueled a record surge in state revenues between 2003 and 2008. Albany lawmakers proceeded to spend the money as if the boom would never end. They kept right on spending as the subprime mortgage debacle began to unfold in 2007—and approved yet another big budget increase just a few weeks after Bear Stearns collapsed in March.

The loudest chants for a “millionaire tax”—now apparently redefined to hit incomes starting at $250,000—come from a coalition of public employee unions and health care providers who’ve been the chief beneficiaries of Albany’s largess.

Their motives are obvious: Even in the teeth of an economic and fiscal crisis, the unions don’t want to give up their scheduled pay and benefit increases, and the health-care industry doesn’t want to see the nation’s biggest Medicaid program cut down to more affordable size. So they hide behind the “fairness” banner to promote a massive tax hike aimed squarely at New York’s economic decision-makers—at a time of tremendous economic uncertainty, when the industry that was the source of one-fifth of the state’s tax receipts has effectively wrecked itself beyond repair.

Instead of driving another nail into Wall Street’s coffin, state lawmakers should be focusing on how to promote the economic growth and diversity New York needs. They should start by making the tax code more, not less, competitive. New York’s current statewide income tax rate of 6.85% is the second highest among major Northeastern states. New York City’s combined state and local income tax rate of 10.5% is the highest in the country.

It used to be even worse. The state’s top income tax rate peaked at 15.38% in 1977. Most of the ensuing tax rate reductions were enacted under two Democratic governors, Hugh Carey and Mario Cuomo, with finishing touches from Republican George Pataki. This reflected a bipartisan consensus that the high tax rates of the 1960s and ’70s had nearly destroyed New York’s economy. Must we learn the same lesson all over again?