Several key members of the City Council set the stage yesterday for a heated political battle with Mayor Marion Barry over his proposals to make deep cuts in city services and to increase taxes to help ease the city's budget crisis.

Barry's proposed cuts were the most severe in the District of Columbia since the initiation of home rule five years ago.They involve the elimination of 1,223 jobs and curtailment of some programs in virtually every city agency.

Most members of the Council focused on the issue of higher taxes, however, and suggested that even deeper cuts be made.

After Barry briefed the council on his plan last night, Council Chairman Arrington Dixon said it was essential "to look for ways to avoid burdening the citizens with extra taxes."

Council member Betty Ann Kane, the most vocal opponent on the council of the way Barry has handled the deficit problem, said she wanted to look for further budget reductions.

"Most of Barry's reductions are in agencies that are overspending and should not have hired those persons in the first place," Kane said. "I'm not persuaded on any tax increase yet."

Council member John A. Wilson (D-Ward 2), chairman of the Council committee that must approve any tax increases, said he is not yet convinced that Barry has made enough reductions to justify new taxes.

"I'm not even sure they're cuts," Wilson said. "They look like maneuvers. To stay away from the word 'gimmicks,' I'll say they look like maneuvers."

Wilson said Barry told the council he is considering increases in property tax and a tax on professional and trade services, as well as higher taxes on gasoline, hotel rooms and deed recordation.

Barry told reporters later that he had ruled out any increase in the city's sluggish personal income tax because, among other things, any such tax increases could not be realized until April 15, 1981.

Kane said she believed Barry made a "serious" effort at reductions, but added that she believes if the District receives a $107.4 million supplemental appropriation Barry is requesting from Capitol Hill, city spending might actually increase.

In addition to his criticism of Barry's proposed tax increases. Dixon also criticized the mayor's planned layoffs.

"I think there are ways we can reduce some of the agencies and find reductions that will not result in layoffs," Dixon said.

Dixon said the council hoped to review all of Barry's proposals and take action on them by the end of this month. Corporation Counsel Judith Rogers said that the mayor had the authority to initiate layoffs and program reductions without council approval, but needed the council to act on new taxes and to forward a supplemental requests to Congress.