D.C. City Council member John A. Wilson yesterday proposed a sharp reduction in the tax rate for residential property that would cut nearly $200 from the annual tax bill for the average Washington home, valued at $91,000.

In addition to the 18 percent reduction for residential property owners, Wilson, a candidate for mayor, also proposed a 6 percent cut for commercial property, a 50 percent property tax break for most elderly residents of the city and a tax credit for commercial businesses to encourage them to hire D.C. residents.

Wilson (D-Ward 2), chairman of the council's tax writing committee, said that he did not know how much his proposals would cost the city in lost revenues and had not tried to find out because running the city is not the responsibility of the council.

"I wasn't interested," he said. "The obligation of the mayor is to run the city with whatever revenues the legislature levies."

City tax officials suggested yesterday that Wilson's residential and commercial property tax rate reductions would have cost the city $20 million had they been in effect this year and would cost substantially more next year, when Wilson has suggested that they take effect.

Wilson already this year has proposed a cut in the business franchise tax that would cost the city an additional $20 million, city officials said.

The officials said Wilson's plan for property tax relief for senior citizens is so broad that it would take several days to estimate the revenue loss from it.

"Good Lord," exclaimed Carolyn L. Smith, director of the city's finance and revenue department. "It's super duper. Did he propose any program cuts?"

"It costs money to operate the city and render the services that are desired by the citizens," Smith said, "and the program that is being proposed will have an adverse impact on those services if it is enacted."

Wilson, who announced his proposals in a District Building conference room, insisted that the plan was not politically motivated--even while Gregory Simpkins, his campaign press spokesman, stood by his side, flipping charts that highlighted the plan.

Wilson said he agreed that residents should be wary of election-year tax proposals. But, he added, "I think it works in the benefit of the majority of the citizens in the city. If they deem it political in its context, or the council deems it political in its context, then it won't pass, probably."

Under the proposals, the rate for commercial property, now assessed at $2.13 for every $100 of assessed value, would be cut to $2. A commercial property assessed at $500,000 would get a tax break of $802.75. Residential property tax rates for every $100 of assessed value would drop from $1.22 to $1.

Wilson's plan would give persons 62 or older a tax credit equal to one half of their property tax bill if their household adjusted gross income were $30,000 a year or less.

Wilson said his plan would affect nearly every elderly property owner in Washington. Smith agreed, saying that the adjusted gross income provision would permit some wealthy persons who have income from tax-exempt securities to qualify for the tax relief.

"It's a shotgun approach," said an aide to Smith. "It's not equitable because it's not based on need." The aide said the city leads the nation in property tax breaks for elderly citizens, including homestead exemptions and circuit-breaker taxes that freeze the amount elderly persons or other low-income persons pay.

Wilson said he made the proposals because "some serious problems have developed which frankly threaten the economic health and future of the city." Among the problems he listed were increased residential assessments and business taxes that he said are "driving many of our businesses to the Maryland and Virginia suburbs."

He said new businesses do not "consider the District as a suitable location" because of tax burdens in Washington.

In 1978, property tax relief became a significant issue among the three major Democratic candidates for mayor, each of whom proposed various solutions in the face of soaring assessment increases that now appear to have slowed.

Largely as a result of the exchange of proposals, the city residential tax rate gradually was lowered from $1.83 before that election to its current rate of $1.22, a homestead exemption of $6,000 was enacted and later increased to $9,000 and a multi-tiered system of tax rates was developed.

Since 1977, assessments have gone up by an average of 21 percent each year. During the same period, the tax rate has decreased by 33 percent.

Wilson said yesterday that assessments have increased at such a rate that a home assessed at $40,000 in 1976 would now be assessed at $137,362--an increase of 243 percent--if its value had grown each year by the citywide average.

Because of the tax relief measures since enacted, however, the property tax bill for such a residence would have increased by less than one-half of that amount, based on past and current tax rates.

In 1976, when the residential property tax rate was $1.83 per $100 of assessed value, and there was no homestead exemption, the owner of the $40,000 home would have paid $732 in property taxes.

Today, with the increased assessments and lower tax rate, and with the homestead exemption in effect, the owner of the $137,362 home would pay $1,566 in property taxes--an increase of $834, or 114 percent more than in 1976.