A coalition of labor, business and educational organizations urged Congress yesterday to restore tax benefits for employer-provided education -- a benefit they said pays for itself by improving workers' earning potential.

Earlier this year, Congress wiped out a program that had treated funds provided to a worker for education as a tax-free benefit.

The program, which expired Dec. 31, 1983, had appeared likely to be extended. When the 1984 tax bill came out of a congressional conference, however, the extension was not included.

As a result, the law reverted to what it was before the program was adopted in 1978: Funds for education are tax-free only when the training is directly related to the worker's current job.

The program had been expanded in 1978 on the grounds that the earlier version was too restrictive and discouraged workers from receiving training not directly related to their current jobs but necessary for advancement.

Supporters of extending the program argued yesterday that ending it strikes at lower-income workers and displaced workers.

William Dukes, a former employe of Caterpillar Tractor Co. who was directly affected by Congress's decision to allow the program to expire, told a press conference, "This comes at a bad time for me and my family."

Dukes, who was laid off permanently in 1983 because of a plant closing, received $1,000 from Caterpillar for education or relocation.

Because he did not want to move his family, he took the funds and studied to be an electronics specialist. His reimbursement was cut to $654.30, when taxes were withheld.

The groups endorsing restoration of the tax benefits included the American Society for Training and Development Inc., the U.S. Chamber of Commerce, the National Organization for Women, the American Bankers Association, the National Association of Manufacturers, major corporations such as McDonnell-Douglas Corp. and General Motors Corp., unions such as the National Education Association and the United Auto Workers, and many education associations.

Despite the cost of extending the program, estimated at $25 million a year, "the net effect is it's not going to be a drain on the budget" because it improves workers' earnings, which subsequently produces more revenue, said Frederick J. Krebs, director of the Employer Relations Section of the U.S. Chamber of Commerce.

The group said it hoped Congress would restore the benefits before adjourning again Oct. 4, but conceded that it would be difficult to get the program through in the short time that remains.

"If there is the opportunity this legislative year, we should try to do what you want to do," said Sen. Steve Symms (R-Idaho). With the expiration of the program, "the people who are going to be hurt worst are the lowest paid and lowest skilled workers," he said.

Curtis Plott, executive vice president of the American Society for Training and Development, said there had been a 74 percent increase in the number of employer-paid courses between 1978, when the program was expanded to cover a broader range of employe education and training, and 1981. Many of the beneficiaries were women, he said.