THE JUDICIAL REFORM legislation introduced Wednesday by Sen. Edward M. Kennedy (D-Mass.) takes up where similar legislation sent to Capitol Hill recently by President Carter leaves off. While endorsing everything the president proposed, Sen. Kennedy has also chosen to tackle some of the hard issues that the administration bypassed. Taken together, the two sets of proposals offer major improvements in the way the courts operate.

The most controversial of these are likely to be a Kennedy proposal to create a new circuit court of tax appeals and a Carter proposal to merge the Court of Claims and the Court of Customs and Patent Appeals into a new circuite court. These changes would resolve acute problems in tax, patent and trademark law. All of the nation's 11 circuit courts now decide cases involving those areas of the law. Because the Supreme Court rarely reviews any of those decisions and because the 11 courts do not agree on how specific laws should be interpreted, the same case can be decided differently in one part of the country from the way it would be decided in another. The president would resolve that problem for patents and trademarks by routing all such appeals to the new court he is proposing. Sen. Kennedy would do the same for tax appeals by creating a court to handle all of them. The administration considered adding tax cases to its new court, but dropped the idea because of opposition to it on Capitol Hill and in the legal community. Sen. Kennedy may have found a formula -- the use of rotating rather than permanent judges -- to blunt the argument that a court specializing in tax cases would quickly become too pro-government.

Another controversial proposal, backed by both the administration and Sen. Kennedy, would eliminate the "diversity" jurisidiction of the federal courts. That involves cases, most of them the result of automobile accidents, handled in federal courts only because the parties to them are residents of different states: Forcing those matters into the state courts would cut the case load of the federal courts by about 25 percent and might result in improved state courts because more lawyers would worry about the quality of the judges in them.

The third major proposal, Sen. Kennedy's alone, would provide a system in each federal judicial circuit for disciplining judges who are accused of misconduct or simply not doing their share of the work. After following a fixed procedure, each judicial council could censure, reprimand or reassign judges and, in extreme cases, recommend impeachment. The proposal is clearly preferable to one that passed the Senate last year to create a mechanism short of impeachment to remove judges.

Among the other proposals is a group that was proposed to Congress last year and died more of inertia than opposition. One would increase the number of civil cases going to arbitration instead of to trial. Another would permit magistrates, instead of judges, to decide more petty criminal cases. A third would provide federal assistance to local governments that create non-judicial ways of settling neighborhood and family disputes. All should be passed this year.

Another part of the reform packages involves judicial housekeeping: changing the Supreme Court's jurisdiction by eliminating the requirement that it must decide certain kinds of cases; setting five-year terms for chief judges of the lower federal courts; and strengthening the administrative powers of the judicial councils. Each proposal would remove obstacles that sometimes hinder efficient operations.

Perhaps the most important proposal in the long run in one to increase the amount of interest the winner of a monetary judgment can collect. Interest rates now paid while cases are pending often are unreasonably low, thus making it profitable for those who have lost to postpone payment by taking frivolous appeals. In addition, this proposal authorizes judges to award interest before cases are decided in some situations where the liability of defendants is clear. That could speed up the disposition of some cases by eliminating the financial benefit delay now brings to clear losers.

The importance of all this legislation to cleaning up a backlog of judicial problems is clear. With the administration and congressional leaders united in support of much of it -- and in disagreement over little, or none, of it -- there is a chance Congress will do more this year to improve the court system than it has done in the last two or three decades.