The AFL-CIO yesterday called the House-passed $16.3 billion tax cut "grossly inequitable," and urged the Senate Finance Committee to adopt a simple alternative that would cut taxes by $21 billion, mostly for lower income families.

Andrew J. Biemiller, the AFL-CIO's chief lobbyist, said the House bill would benefit "primarily higher income taxpayers and individuals with large amounts of sheltered income and corporations."

Committee members, who have questioned business leaders at length on the need for tax incentives for investment during two days of testimony, asked Biemiller but one question which did not relate at all to the AFL's proposed tax cut substitute.

"Thank you, Mr. Biemiller, you always make a very fine statement," chairman Russell Long (D-La.) said as he dismissed the labor lobbyist.

Biemiller, in his testimony, told the committee that the House-passed tax bill provides almost no tax relief for middle-income taxpayers. "The House bill would obviously flunk the 'truth-in-labeling' law," Biemiller declared.

President Carter has said that he is dissatisfied with the House bill, in large part because it gives most of the tax cuts to those in higher income brackets. Carter has said he would have no hesitation in vetoing a tax bill if the Senate does not make changes the administration wants.

Carter wants to shift more tax benefits to those earning less than $20,000 a year and provide fewer breaks for taxpayers making more than $50,000 a year.

Biemiller said yesterday that the 88 percent of the nation's taxpayers who earn less than $30,000 a year will get only one-third of the relief provided in the $16 billion House bill.

The AFL-CIO proposed again a "simple" tax cut plan that would give the biggest benefits to those earning less than $30,000 a year.

The AFL-CIO plan, which was presented to the House Ways and Means Committee, would increase the $35 a person tax credit to $150 and allow all individuals and businesses an additional tax credit for individuals and businesses equal to 5 percent of Social Security taxes paid.

A taxpayer is able to reduce the taxes owed by the amount of a tax credit. If an individual owed $1,000 in federal taxes and received a $150 tax credit, he would pay the government $850.

Former Treasury Secretary Henry Fowler told the Finance Committee profits cuts in taxes on capital gains - profits from the sale of stocks or other properity - would stimulate investment and create jobs. Biemiller said that the labor organization is opposed to reductions in capital gains taxes and the administration wants major changes in the capital gains tax changes in the House bill.

Fowler, who was Treasury Secretary in the Johnson administration, said it is "not terribly material" who gets the initial benefits of capital gains tax cuts because such cuts stimulate investment that create jobs for poorer people.

But Fowler advocated a change in capital gains taxes that was first proposed in 1963 by President Kennedy.He said the changes in capital gains taxes contained in the House bill would not benefit a married couple earning less than $53,500.

At present taxpayers can exclude half their capital gains from income taxes with the rest taxed at regular income tax rates. Fowler suggested reducing to 30 percent the amount of a capital gain that is taxable. He said that type of change in capital gains taxes would benefit all taxpayers, whatever their income, if they have profits on the sale of a stock or a house.*