The Senate Finance Committee is always criticized for being the friend of big business. Not fair. It is the friend of small business too. Chairman Bob Packwood has put forward a proposal that would cut the taxes of the nation's small businessmen by an estimated $20 billion over the next five years. It is part of the plan he drafted as a starting point for the committee's work on tax reform.

Advocates say the proposal will stimulate expansion of small businesses, which they describe as both a font of competition and the source of most new jobs today. Without the proposal they also say small businesses would lose ground to large businesses, always a bugaboo. But a simpler and better way to think of it is as an income transfer from the public sector to the small business sector, at a time when the public sector is the needier of the two. It is a poor idea.

The proposal concerns the hardest of all subjects in business taxation: what to do about the costs of machinery and equipment. The general rule is that businesses have to write these off over time -- in theory, over the useful lives of the items bought. An exception in current law is that a business can "expense" or write off the first $5,000 in such costs in the year incurred. This was mainly done to simplify the code for smaller companies. The amount is scheduled to increase to $10,000 by 1989.

In its reform bill, the House voted to increase the amount to $10,000 right away, but to limit the provision to businesses whose costs of machinery and equipment are less than $200,000 a year. Small business groups had hoped to improve on this a little in the Senate. Mr. Packwood improved on it a lot. He would raise the amount to $50,000. It doesn't sound like much, but that is what would cost the $20 billion.

One rationale has to do with the basic nature of the tax bill. It is supposed to be a cashing-in of preferences to pay for lower rates. The largest preference that both big and small business would lose is the investment tax credit, which now cuts business taxes $22 billion a year. In return, however, big business would get a larger rate cut than small, because small business rates are already lower. The expensing rule would make up for this.

More important is that Congress simply likes small business, not all of which is so small. In addition to its place in the economy, small business has an important place in our mythology. Congress overdoes its care and feeding. The executive branch has a Small Business Administration; both houses of Congress have small business committees.

The administration has tried in each of the last several years to abolish the SBA, close out its lending programs (which benefit less than 5 percent of all small businesses), transfer its advocacy function to the Commerce Department. Congress has balked, but has steadily reduced the SBA programs' size. That is progress, a recognition that thousands of businesses are formed every year and the government does not need to be their nurse. The Finance Committee should let a similar principle be its guide on the tax side.