Tax Cut Plan Aimed at Middle Class : Legislation: Gore proposal would grant tax credit of $800 for each child under 18. Levies on affluent would rise.

With a partisan flourish, Sen. Albert Gore Jr. (D-Tenn.) and three senior House Democrats on Monday unveiled a plan to reduce federal taxes on 134 million parents with children under 18 while sharply increasing the tax burden on 15 million upper-income Americans.

The legislation was presented as a Democratic anti-recession stimulant that would restore tax fairness for middle-income families who lost ground during the 1980s, when Republican tax cuts gave the largest benefits to the rich and payroll taxes rose considerably.

Because the bill calls for an increase in the top tax rates, President Bush and Republican congressional leaders are expected to fight its enactment, in line with the Administration’s recently revived no-new-taxes position.

Sponsors hope it will gather enough momentum from Democrats in the House and Senate to overcome the reluctance of Rep. Dan Rostenkowski (D-Ill.), chairman of the House Ways and Means Committee, to consider any tax bill this year.

Gore, a possible Democratic presidential contender in 1992, planned to advocate the bill today when he addresses a convention of the centrist Democratic Leadership Council in Cleveland.

“From the Democratic point of view, we couldn’t be in a better position,” said one House sponsor, Rep. Thomas J. Downey (D-N.Y.), noting that the legislation would not raise overall taxes but would shift the burden from working families to upper-income groups.

Downey said House Democratic leader Richard A. Gephardt of Missouri was expected to endorse the new plan and predicted that Rostenkowski and Speaker Thomas S. Foley (D-Wash.) eventually would lend their support as well.

In the Senate, Democratic leader George J. Mitchell of Maine and Sen. Lloyd Bentsen (D-Tex.), chairman of the Senate Finance Committee, welcomed the prospect of middle-income tax relief but stopped short of endorsing the new proposal.

The measure would replace the existing personal exemption for children with a tax credit that would reduce a family’s taxes by $800 for each child under 18. It would also expand the existing earned-income credit that goes only to lower-income working families with children.

To offset the revenue loss from those two provisions, the bill would replace the current three-bracket income tax rates of 15%, 28% and 31% with a four-bracket system of 15%, 28%, 32% and 35%. The 35% rate would affect only those with adjusted gross incomes of $130,000 or more.

In addition, an 11% surtax would be imposed on taxpayers with adjusted gross incomes of more than $250,000 a year. A special alternative minimum tax--designed to ensure that all high-income people pay some tax regardless of the amount of legal deductions they have--would be raised to 29% from 24%.

However, upper-income taxpayers would benefit from cancellation of provisions adopted last year that now limit deductions for state and local taxes, charitable contributions and personal exemptions.