Congressional leaders and Reagan administration officials are discussing a budget compromise proposal to limit cost-of-living increases on a broad range of federal benefit programs, including Social Security and other retirement accounts, while increasing revenues by limiting the indexing of federal income taxes, according to sources familiar with the talks.

One senior official said the proposal -- dubbed the "2 percent" plan -- would eliminate the first 2 percentage points on cost-of-living allowances on retirement benefits that normally rise according to the rate of inflation. It would also reduce by 2 percentage points the adjustment of individual income tax brackets and deductions that would otherwise become fully indexed to inflation in fiscal 1989.

Cutting the cost-of-living adjustment for federal retirement benefits including Social Security would save about $5 billion in fiscal 1988, which began Oct. 1, and as much as $12 billion the following year. The limit on income tax indexation would not save anything until fiscal 1989, when it would yield about $4 billion in revenue.

However, officials cautioned that the proposal is only part of a broad examination of all alternatives that could lead to at least a $23 billion reduction in the deficit this year. The proposal to cut retirement benefits, they said, would be expected to encounter significant political hurdles, and could be accomplished only with the backing of President Reagan and top congressional leaders.

One official close to the budget negotiations that began a week ago with a meeting between Reagan and congressional leaders said that negotiations have not reached the point that the proposal is the leading idea on the table. "It's one of many things that are are being discussed and is no closer to fulfillment than anything else," he said.

"This group {the administration and congressional negotiators} isn't going to make this decision," said another official, who described as "very, very difficult" the task of getting agreement for cutting retirement benefits. "It will require the leaders and president coming together."

However, the discussion of Social Security cuts at all is significant and an indication of how Wall Street's troubles have shaken conventional wisdom about what is politically possible in the battle to reduce the deficit.

"If you are looking for something dramatic, that is dramatic," said one official close to the talks. "Everyone could say we really did something."

When he announced that he was willing to enter into talks with congressional leaders on a bipartisan plan to reduce the federal deficit in response to the stock market crash, Reagan said everything was "on the table" except Social Security. And his negotiators have made it plain they are unwilling to discuss increases in individual income tax rates.

In addition, opposition can be expected from some House Democrats who are already frustrated by what they see as the administration's continued inflexibility on raising taxes.

Sources close to the talks said that the senior administration negotiators -- Treasury Secretary James A. Baker III, White House chief of staff Howard H. Baker Jr. and budget chief James C. Miller III -- have so far been willing to offer higher revenues only in the range of those offered in the president's budget, about $6 billion.

Until the administration is prepared to discuss taxes close to the $12 billion already approved by the House and a Senate committee, one source indicated, congressional Democrats are unlikely to bend on reductions in politically popular entitlement programs such as retiree benefits.

Nonetheless, one source said he sees a growing momentum on Capitol Hill for a "dramatic" response to the deficit problem that would send a clear signal to financial markets.

Discussion of the "2 percent" proposal arose Friday during a review of cuts that could be made in smaller federal retirement programs. The session included the two Bakers and Miller.

Some members of the negotiating team then argued it would be unfair to cut some cost-of-living allowances without trimming all of them, including the largest ones benefiting those on Social Security, and former civilian and military employes of the government.

Sen. Pete V. Domenici (R-N.M.), the ranking Republican on the Senate Budget Committee, alluded to the possible cuts yesterday when he said that the administration is willing to negotiate seriously on higher taxes if Congress demonstrates a commitment to cutting spending.

"They aren't going to negotiate on taxes unless we are really willing to have some two-year spending cuts that are for real, credible -- and you have to go to the entitlements, you have to go to programs like farm support, like Medicare, and many of the other programs that have grown rather broadly," said Domenici in an appearance on CBS News' "Face the Nation."

The budget negotiators are coming close to an agreement on about a $6 billion modified freeze on domestic and military spending accounts that are subject to the yearly appropriations process, but are still far apart on cuts in entitlements -- programs that automatically confer benefits according to existing laws.

Nonetheless, Domenici predicted yesterday that the talks could produce a package beyond the $23 billion minimum goal that would be achieved automatically under the revised balanced-budget law even if the budget negotiations collapse.

"In my opinion, we will get more than $23 billion, it will be two years, and it will be credible," said Domenici. "I wouldn't be surprised that it would be as high as $30 billion and more than $30 billion in the next year . . . . "

Meanwhile, there were some indications that congressional negotiators would push for another meeting with Reagan this week in hopes that a face-to-face encounter would make the administration's bargaining position more flexible on higher taxes. Reagan returned to Washington yesterday from Phoenix, where he attended a memorial service for his mother-in-law.