It is blended into every work of art in the National Gallery, almost every article of clothing in the Junior League's 120 thrift shops and almost every book researched at the New York Public Library. It has shaped institutions as varied as the electronic church, Harvard University, Children's Hospital and the Paralyzed Veterans of America.

The federal income tax deduction for gifts to charity is one of the hidden engines of American life. Known to tax lawyers mainly by its tax code number, 501(c)(3), it has underwritten this country's tradition of philanthropy by making generosity pay.

In the next few weeks, the charitable deduction is likely to become much better known. Last week, the Treasury Department said that it can raise an extra $6.7 billion in 1990 by scaling back the deduction. The key Democratic tax-revision proposal, authored by Sen. Bill Bradley (D-N.J.) and Rep. Richard A. Gephardt (D-Mo.), also would reduce it.

In response, an unlikely assortment of leaders, from television evangelists to officials of Ivy League universities, has warned that the American way of life is in peril.

"One of the glories of this country is what has been accomplished by the private sector, and the reason it has happened is because of the tax laws and the way they encourage people to give great things to public institutions," said William Macomber, president of New York's Metropolitan Museum of Art.

"When the Metropolitan Museum started, nobody dreamed it could produce an institution comparable to the Louvre or the Hermitage or the British Museum or other institutions of that caliber," Macomber said.

The tax code changed that, starting in the early 20th century, Macomber said, giving rise to world-renowned museums in Boston, Chicago, New York, Philadelphia and elsewhere.

About 90 percent of the value of the art in the Metropolitan Museum has come from deductible gifts, Macomber said. The National Gallery puts the figure at 100 percent; the Corcoran Gallery at 75.

The Treasury Department's "tax simplification" proposal would dramatically alter the system of incentives that makes philanthropy a blend of public spirit and self-interest.

Under current law, donors may deduct from their taxable income almost all gifts to charitable, nonprofit institutions, which range from traditional charities, such as the United Way, to churches, universities, hospitals, museums, environmental groups, think tanks, womens' groups, shelters and more.

For those in the upper tax bracket, it often is more profitable to donate stocks, art or property to charitable institutions and subtract the inflated current market value of the gift from taxable income, than to sell them, perhaps for a lower-than-market price, and pay a capital gains tax on the profit.

Take the benefactors who recently donated 50,000 acres of land to the Nature Conservancy, a 501(c)(3) organization that acquires natural areas and protects them from development. The land was valued at about $4 million, according to general counsel Mike Dennis. The donor, who was in the 50 percent tax bracket, was able to shelter $2 million in income with the gift.

Even for middle-income families, the deduction of small contributions to such groups as The American Cancer Society, local museums and hospitals, churches and alma maters is a major incentive for giving and is viewed as a key to the survival of those organizations.

Under Treasury's proposal, donors could deduct only contributions that exceed 2 percent of gross income. This would eliminate the financial incentive for most taxpayers because, according to a study by an umbrella group of almost 600 charitable institutions known as Independent Sector, the average person gives 1.97 percent of gross income to charity.

The Treasury Department also proposed cutting the deduction allowed for donations of stock, art, land and other "appreciated property" -- the most important kind of gift to museums and universities. Rather than allowing deduction of the full market value, Treasury would allow deduction of the purchase price multiplied by an inflation factor.

This would produce a much smaller deduction and would make it more profitable, in many cases, for the donor to sell the property.

The tax bill proposed by Bradley and Gephardt also would reduce incentives for charitable contributions, allowing donors to deduct no more than 14 percent of the value of gifts.

Some officials insist that changing the deduction will not reduce philanthropy, but most professional fund-raisers disagree.

"The tax deduction doesn't cause people to give. Altruism causes them to give," said Bob Smucker, vice president of Independent Sector. "But the size of the gift is substantially influenced by the deduction."

"In everything we do as fund-raisers, we point out to prospective donors the tax benefits of giving," said Douglas Cater, president of Washington College in Chestertown, Md., which finances one-third of its operating costs through donations. "It's built into the fabric of philanthropy in the same way that the tax deduction for interest payments on mortgages is built into the marketplace of home buying."

The effects of the deduction are pervasive in American life. At the New York Public Library, a 501(c)(3) institution second only to the Library of Congress in the size of its collection, officials said charitable contributions pay almost one-third the cost of running their research libraries.

In those libraries, according to an official, author Barbara Tuchman researched "The Proud Tower" and "The Guns of August," Robert Caro researched "The Power Broker," Nancy Milford researched "Zelda" and Robert Massey researched "Peter the Great."

The Metropolitan Museum received its entire wing of primitive art as a charitable gift from the Rockefeller family and used charitable contributions to pay 90 percent of its construction costs in the last decade, which totaled $100 million. The Corcoran received "Willows of Vetheuil" by Monet as a gift from the Edward Walker family. The Junior League last year raised $5 million by selling clothes donated to its 120 thrift shops.

Harvard University raises about $100 million a year from charitable gifts, compared with $2.5 million by Cater's Washington College. Both institutions say they would be forced to raise tuition if not for gifts.

Television evangelists, such as Jerry Falwell and Jimmy Swaggart, raise up to $60 million, according to the National Association of Evangelicals. The Heritage Foundation raises almost its entire $10 million annual operating budget through charitable gifts.

Officials of most of these groups say their organizations would be "devastated" if the deduction were reduced according to Treasury's plan and would be squeezed to a lesser extent by the Bradley-Gephardt bill. They say it is inconsistent with President Reagan's effort to transfer more of the burdens of government to private charities.

"This sends a very confused signal," said Michael Botwinick, director of the Corcoran.