Many Washington area parents who consider themselves middle-class would end up paying as much as $1,650 more a year in taxes under a major child-care bill passed by the House and pending in a congressional conference committee.

The focus of the legislation -- three years in the making -- is to give child-care grants and tax assistance to low-income parents.

One of the ways the House would pay for this, however, would be to phase out current child-care tax credits and exclusions for families with adjusted gross incomes of more than $70,000 a year and to eliminate them entirely for those exceeding $89,000.

Businesses and women's groups are gearing up to fight the proposed reduction of tax benefits in the fall, when the House and Senate resume negotiations over different versions of the bill.

Those groups argue that the House plan would unfairly hit the growing number of couples who both must work to support their children, particularly those in high-cost urban areas such as Washington.

"You go to some of the rural districts in the West, Midwest or South, a tax return of $70,000 is high, but go to virtually any urban area and it isn't," said Ken Feltman, executive director of the Employers Council on Flexible Compensation, a group of major companies that has organized a campaign against the phaseout.

In Washington, for example, a couple who are mid-level government workers or a police officer married to a legal secretary could be affected. More than 26 percent of families in the Washington area had income above $75,000 in 1989, according to estimates by CACI Inc., a Fairfax-based marketing information services company.

The ceiling would affect people like Janice and Bob Kelly, of Alexandria, who both work full time to support themselves and their two children, 10-month-old Erin and 3 1/2-year-old Bryan.

They live in a cozy three-bedroom, one-bath town house in Alexandria that they say is starting to feel small. They own a five-year-old Subaru, and Bob Kelly takes a 40-minute Metro ride to work each day. While not financially strapped, they say they also do not feel like fat cats.

"We're just two average people who go to jobs daily," said Bob Kelly, a compliance examiner with the National Association of Securities Dealers.

"We couldn't make it on his income alone or my income alone," added Janice Kelly, a project manager for a real estate developer.

The couple pays $14,000 in child care. While they now qualify to take a tax credit of $960, they recently started participating in a dependent-care assistance plan through Bob Kelly's job that allows them to exclude $5,000 of their income from taxes. That is worth more in reduced taxes than the credit.

They would lose much of the benefit of either the exclusion or the plan that the House passed, because their combined income is more than $70,000. But they do not make so much that breaks would be eliminated entirely for them.

The House bill would cost about $9 billion more during five years than the Senate version. The House wants to help pay for its more generous treatment of low-income families with its phaseouts of tax benefits for higher-income families, who would pay $1.5 billion more in taxes during the five years.

The child-care tax credit now can save these families 20 percent of child-care costs, up to $960 for two children, and employer-sponsored dependent-care assistance plans are worth up to $1,650 for employees who set aside $5,000 in untaxed income for child care. Several major Washington area employers -- including Marriott Corp., Giant Food and The Washington Post -- offer these plans.

On the other side of the equation is Diann Daley, a mother of three who lives about a mile from the Kellys in public housing. Daley makes $6 an hour as a companion for a disabled woman, and her husband, Tony, is a truck driver for Fairfax County. With a combined income of about $21,000, the Daleys could benefit from either the House or the Senate bills.

They already are eligible for child-care subsidies through the city of Alexandria but have been on a waiting list that now totals about 100 families. Diann Daley is taking her 2-year-old son, Antonio, to her job each day, but wants to get him into a day-care center.

"He needs to be around children his age," said Daley. "I hope they do pass that bill about babysitters, because they need it around here." Daley, who lived in a shelter for homeless families until the public housing spot came open about six months ago, said she had refused several jobs because she could not afford child care.

"They {the city government} had a lot of jobs, but I couldn't go unless I had a babysitter. I thank God I can take him with me" to her current job, she said.

The subsidy funds in both bills would enable Alexandria and other localities to help more families like the Daleys get child care or could be used to raise subsidy levels.

The Daleys also would gain from a Senate proposal that would allow some lower-income families to claim the credit for child-care costs and be reimbursed for it, even if they owe no taxes. The plan is open to parents with adjusted gross incomes of up to $28,000 a year.

But even at their income level -- painfully low for a family of five trying to make ends meet in the Washington area -- the Daleys earn too much money to benefit substantially, if at all, from the House's main assistance plan, a large expansion of the earned income tax credit for low-income working families.

That program supplements the wages of low-income parents, with benefits peaking for people in the $7,000-to-$11,000 range and phasing out at about $21,000. The maximum wage supplement under the House plan would be $2,200 for a family with three children, up from $953 now, while a more modest Senate plan would raise the current credit by up to $750.

Tax brackets and other provisions aimed at making high-income people pay greater portions of their salaries in federal taxes do not differentiate between people living in high-cost areas and those in low-cost areas, tax experts say.

This means that people in high-cost areas generally are affected the most by income limits, such as the proposed child-care credit ceiling.

The debate over phasing out child-care tax benefits has taken on philosophical tones as well. "It has become an across-the-board litmus test" both for social conservatives, who want to encourage women to stay at home with their children, and for feminists, who want working mothers to get help with child care, said one congressional staff aide involved in shaping the bill.

The House bill would cost about $27 billion over five years, of which $8.75 billion is for programs such as direct child-care subsidies to lower-income families, expansion of Head Start to full-day, year-round programs, and more before- and after-school programs. The rest is in expanded tax credits for the lowest-income parents, whether they pay for care or if a parent stays home.

The Senate version would cost about $18 billion during the five years, also with $8.75 billion in program money. The Bush administration has said it wants to hold the five-year figure to $15 billion, and prefers tax credits for the poor over government spending programs.

Ernestine Ross and her husband, Paul, who live in Hyattsville, are between the Kellys and the Daleys: They probably would neither win nor lose directly from either child-care bill, though they both work full time and have about $5,000 a year in child-care costs for their two children.

She is a floor supervisor at Peoples Drug Stores, and he is a color proofer at a graphics firm affiliated with U.S. News and World Report. Between them they make in the mid-$30,000s, Ernestine Ross said.

"After rent and food and child care, there's nothing left," said Ross. "It's a killer."

At their income level, the Rosses would not be eligible for the earned income tax credit. Even with more federal money to expand current subsidy programs, they probably still make too much to get any.

"All the help {in the child care legislation} is going for the people who aren't making anything. They should vary it for different income levels. I know I need it," Ross said.

CURRENT LOCAL PROGRAMS; BY D.C. AREA JURISDICTIONS

........................ DISTRICT .......................

Subsidies:

7,139 slots -- 10,000 children

Income limit: $27,922 for family of 4

Waiting lists at individual centers

School-Based "Latchkey":

In 45 of 124 schools

Head Start:

9 a.m. - 3 p.m.

2,200 children

........................ FAIRFAX ........................

Subsidies:

2,000 children

Income limit: $34,800

300 on waiting list

School-Based "Latchkey":

In 101 of 128 schools

5,000 children

Head Start:

Replaced with county-funded half-day program serving 1,000 children

........................ ARLINGTON ......................

Subsidies:

500 children

Income limit: $26,520 for family of 4

259 on waiting list

School-Based "Latchkey":

At all elementary schools and special education sites

Head Start:

Half day, some with county supplement for full days

........................ ALEXANDRIA .....................

Subsidies:

212 children

Income limit: $26,520 for family of 4

100 on waiting list

School-Based "Latchkey":

Serving all elementary schools

Head Start:

Full day (with city supplement)

133 children

........................ PRINCE WILLIAM .................

Subsidies:

100 children

Income limit: $26,520 for family of 4

300 on waiting list

School-Based "Latchkey":

Pilot program in five of 39 elementary schools to begin in September

Head Start:

None

Seeks grant to start one to five classes

........................ LOUDOUN ........................

Subsidies:

151 children

Income limit: $26,520 for family of 4

No waiting list

School-Based "Latchkey":

In four of 23 schools (will increase to five in September)

Head Start:

None

Half-day county program for at-risk 4-year-olds at 10 of 23 elementary schools

........................ MONTGOMERY .....................

Subsidies:

Average of 1,162 children monthly in state program with 13 on waiting list

Income limit: $21,915 for family of 4

(County-funded program has income limit of $35,000 for family of 4 and serves an average of 710 children)

School-Based "Latchkey":

In 75 of 113 elementary schools

Head Start:

Half-day, 72 classes in 48 schools

........................ PRINCE GEORGE'S ...................

Subsidies:

Average of 1,700 children monthly

Income limit: $21,915 for family of 4

Up to 600 on waiting lists

School-Based "Latchkey":

In three elementary schools

Head Start:

Half-day, 20 classes at 12 sites

SOURCE: Local government agencies.