City Council member Betty Ann Kane, a candidate for the Democratic nomination for mayor, yesterday proposed lower commercial tax rates and property tax assessments in the District of Columbia as a way of keeping residents and businesses in the city.

Kane, who was warmly applauded after her speech to an audience of more than 50 people at the Ward 7 Business and Professional Association, also said she is opposed to the Barry administration's proposed 34 percent increase in water and sewer rates and increases in taxes on electricity, gas and telephone service that Barry supports.

Meanwhile, council member John Ray, who also is seeking the nomination, released a preview of policy positions for his campaign, including proposals to offer tax credits for businesses that create 20 or more jobs by relocating in the city or renovating their facilities.

Ray suggested long-term tax breaks for businesses that would move into areas the city identifies as "incentive zones." Ray also proposed elimination of the office of the city administrator and the establishment as well of satellite city halls in various neighborhoods throughout the city in an effort to increase citizens' access to their government.

In criticizing Barry's policies toward small business, Ray said, "The present administration has failed to respond to the economy at the bottom tier . . . Seventy-three percent of the work force is employed by small businesses with 20 or fewer persons on the payroll.

"But Barry administration officials cooperated only with those few large developers who are friendly to their political interests. No comprehensive plan has been designed or implemented to retain and assist small businesses."

Kane said after her speech that the proposal to lower commercial tax rates from the current $2.13 per $100 of assessed value to $1.90 and property assessments would not irreparably damage the city's budget by lowering revenues coming to the city treasury.

"Everytime we turn around," Kane said in an interview, "the mayor is increasing the revenue estimates. He said the city's tax structure couldn't conform with the federal tax deductions that keep IRAs Individual Retirement Accounts , Keoghs a retirement plan for self-employed people and all-savers certificates from being taxed because he said it would take $9 million from the tax base.

"But income-tax revenues are up $34 million in this fiscal year and it will carry over into next year," Kane said. "Having seen what happened with the gas tax which was briefly increased in 1980 but rolled back after gasoline dealers complained of being driven out of business , I believe you will see more business done in the city and more tax dollars coming to the city with a less punitive tax system."

Kane made a point of telling the group that she was the only council member to vote against Barry's request to delay implementation of a new, less costly workers' compensation act.

The relatively high cost of workers' compensation and unemployment compensation payments in Washington are cited frequently by businessmen as deterrents to doing business in the city.

Kane also told the businessmen that a proposal by Barry's housing director to put public housing on city-owned property one block from the Deanwood Metro station is a "misplaced priority." Kane said the site should be developed as a shopping area.

Earlier in the day, Ray became the first candidate to issue a statement of what his general policy would be if he was elected mayor. He said yesterday's statement would be followed by position papers on each key campaign issue to be released two weeks apart.

Ray's statement covered problems of city management, crime and law enforcement, economic development, education, health and human services and how the city will handle cuts in federal aid.

"A common thread runs through each of our concerns," Ray said, "and that is the weakness and ineffective leadership displayed by the administration, which promised to bring concern, compassion and results, but failed to spell out to you--the voter--how its goals were to be carried out and a reasonable time frame for meeting those goals."

Besides Barry, the other candidates for the Democratic nomination are City Council members Charlene Drew Jarvis and John A. Wilson; former Carter administration cabinet member Patricia Roberts Harris; physician Morris Harper; Richard A. Jackson, and Dennis Sobin, publisher of a newspaper that features sexually oriented personal advertisements.