There is no honest or even rational way to say that the beneficiary of a $700 tax cut is the victim of a tax increase. It's false labeling, the mark of a hustler with shoddy goods to sell.

Phony as it is, that remains the pious rationale for the administration's campaign to paint members of Congress who vote for fiscal responsibility as irresponsible schemers who are seeking to "tax and tax, spend and spend" the country into bankruptcy.

Nobody's trying to block a tax cut. Whether or not the Congress adopts the $700 cap that the AFL-CIO supports, every American who earns enough to be taxed at all will be taxed less starting in July.

All that remains to be decided is whether taxes will be cut with or without some decent regard for justice, reason and prudence.

Without the $700 cap, the third installment of the president's 5-10-10 tax cut will cost the Treasury about $30 billion next year, and $6 billion of it will flow to the pockets of the wealthiest and most privileged, who have already enjoyed the greatest reductions in their taxes and who do not need it at all.

That $6 billion is just about equal to the amount that the president would squeeze out of food stamps, Aid to Families with Dependent Children, Supplemental Security and child nutrition over the next three years.

This third raid on the public purse under President Reagan's "economic recovery" tax act of 1981 is supposed to set off a wave of capital investment to strengthen the economy, increase production and create jobs. Like the first two, it will do nothing of the kind.

Nor will it promote the pretended goals of the "tax equity and fiscal responsibility" act of 1982.

A family of four with income of $100,000 a year would receive $2,384 a year in tax cuts--on top of the $4,042 a year already gained in the first two installments.

In contrast, a family of four earning $30,000 a year would receive a cut of $325. At $20,000 in income the gain would be $172.

And of course, the millions who have no jobs and no income would receive nothing at all, except greater hardship through further cuts in social programs.

If that is not unjust, how is it unjust to limit families earning more than $100,000 a year to a further tax windfall of $700?

Experience with the first two years of tax cuts proves that windfalls for the wealthy are not an efficient way to revive the economy-- certainly not as efficient as more direct use by the government of the $20 billion that the $700 limit would gain over the next three years.

Part of that $20 billion could help pay the cost of assisting those unable to work and provide opportunity for those who desperately want work to do.

To that extent, it would strengthen the economy as a whole and reduce future federal outlays. No less important, it could provide some relief, here and now, for the federal budget deficit.

Reagan's views on deficit spending no longer seem to have any rational basis. Without ceasing to beat the drum for a constitutional amendment to require balanced budgets, he has sent the deficit to heights never dreamed of. And still he threatens to veto any bill that would even slightly reduce the deficits he has brought about.

Those who can't stop admiring Reagan's loyalty to exploded 18th-century economic doctrines despite all their failures and contradictions might do well to reflect on the doctors who tried in 1799 to cure George Washington's pneumonia by draining more and more blood from his veins.

The U.S. Treasury plainly needs to have the bleeding slowed through a $700 cap on Reagan's tax cut. Since he refuses to stem the flow, a responsible Congress must do it for him.