D.C. City Council member Carol Schwartz (R-At Large) recommended yesterday that the council cut the mayor's proposed $2.2 billion fiscal 1986 budget by $100 million.

Under Schwartz' proposal, $50 million would be used to reduce income taxes for all District residents and the other $50 million would be used to help reduce the city's $269.8 million deficit.

"There are reasonable limits to the tax burden which wise governments place on their citizens," Schwartz wrote in a memorandum to her colleagues. "The District has gone well into the outer limits."

Schwartz contends that the $100 million cut can be made because the mayor has asked the council to increase spending in the operating budget by $168.5 million.

But council member John Wilson (D-Ward 2), chairman of the council's finance committee, said that Schwartz has introduced "a wonderful political proposal."

"I don't think anybody is going to take the proposal seriously," said Wilson." . . . That's like saying you can drop the police department, which nobody wants to do. You have to stay in a reasonable frame of reference."

Schwartz, however, said her proposal is "very serious" and that the cut can be made if the council would eliminate "inflated" administrative costs and reduce the budgets for unproductive programs.

"It is a bloated budget," said Schwartz. "You're not even going to have to fire anybody or hurt anybody."

Schwartz, who was elected to the council in November, campaigned on the idea that the District needed to tighten its financial belt and reduce taxes for residents.

Her proposal would provide District residents with income tax relief by raising the annual personal exemption for all District residents from $750 to $1,000 and eliminating "all taxes" for persons whose income is under $3,000. Taxes would also be eliminated for persons who file joint returns and make less than $4,500.

Wilson said that the fiscal 1986 budget contains about $159 million in natural revenue growth and has a "float" of between $44 million and $50 million that could be cut. But Wilson said it would be "phenomenal" if the council could cut the budget by $20 million. He said what appears to be excess funds now will be absorbed as the government deals with problems in such areas as the corrections department and social services.