A grim memo is being circulated around the departments of the Montgomery County government. It predicts a $21 million deficit at current property tax rates for the fiscal 1980 budget, which will be enacted next spring.

The deficit could be considerably worse - as much as $121 million - if the Taxpayers' League ballot question to roll back the property tax rate passes in November, according to the County Council.

This latest threat to the property tax, traditionally the most dependable and largest single revenue source for the county budget, led the council recently to renew its longstanding plea for an increase in the country's piggyback rate on the state income tax.

But once again, in the face of election-year politics, the idea bombed. The mention of raising taxes to an incumbent legislator seeking reelection in a year of fiscal belt-tightening is like asking an elevator operator to cut the cable.

Aside from the politics, the government is up against a financial dilemma, the problem of finding dependable sources of money to provide services the citizens desire. But there is considerable disagreement over the best solution.

The council members who have consistently backed the income tax increase say it is a more equitable tax because it is based on an individual's ability to pay. In addition, they say it is a reasonable direction in which to move because it is likely that assaults on property taxes will continue.

By contrast, some council members and legislators have argued that Maryland's income tax system is not necessarily any more equitable than the property tax because it taxes all annual incomes over $5,000 at the same rate.

The income tax bill that was withdrawn last week sought an increase of 50 percent in the piggyback tax Montgomery residents now pay. It would have increased the county's piggyback tax from 50 to 75 per cent of the state income tax and shifted not less than 65 percent of the estimated new revenues to allow a reduction in the property tax rate.

"It's part of a package for property tax relief," said Council Member Neal Potter, a sponsor. The increased income tax would provide up to $30 million in addition revenues so that the property tax could be dropped by as much as 43 cents, he said.

"The little guy keeps paying excessively, and no one does anything to take the burden off his back," said Potter, an economist. 'Homeowners' tax relief is long overdue."

In addition, he said a "lag" in commercial and industrial assessments since 1971 has increased the homeowners' property tax burden by 13 percent.

"We do feel if our property tax relief proposals had been dealt with the TRIM (Taxpayers' League) ballot question would have had less chance," said Potter. That proposal would drop the property tax a minimum of 35 cents to $2.25 per $100 assessed value.

But council member John Menke saw it differently. The state income system needs to be overhauled first, he said.

State Sen. Lawrence, Levitan added that under an increased income tax there would not be enough money from the wealthy tax brackets to provide the desired new revenues. "Therefore, much of it would have to come from the middle class," he said.

Three years ago, the council proposal got pass the county delegation to Annapolis, but was killed in a Senate committee with the help of another Montgomery senator, Victor L. Crawford.

Crawford, now chairman of the county Senate delegation said he is against the income tax increase "for the foreseeable future."

Part of Crawford's concern is that revenues the county receives under the formulas for distributing state revenues are disproportionately low in comparison to the amount the county sends to the state in income taxes.

"Montgomery County is (already) fourth from the top in the amount of total taxes it pays to the state," said Crawford.

The county's state legislators have one set of financial considerations and the county council has another. In their politics of budgeting, much remains unresolved.