House Democrats, racing to exploit Republican disarray on the budget and deficit, yesterday rallied around a Democratic tax plan that is aimed to appeal to middle-class taxpayers. Early today a Senate panel passed a bipartisan deficit-cutting plan that is likely to be more acceptable to President Bush.

The House Democrats would offer taxpayers a limited capital gains exemption, drop higher levies on gasoline and raise taxes on the rich.

The plan approved by the tax-writing Senate Finance Committee would double the gasoline tax, limit income tax deductions for wealthier Americans, take a bigger bite of payroll taxes to fund Medicare but cut the Medicare program.

Bush on Thursday said he prefers a package without a capital gains tax cut or higher income tax rates on wealthy Americans because he does not believe it will pass Congress otherwise.

Senate Finance Committee Chairman Lloyd Bentsen (D-Tex.) and other Democrats on the panel emphasized that the Senate plan requires a larger contribution from wealthy taxpayers even though it does not raise the top tax rate.

"We have doubled the share of the tax burden on those making over $200,000 per year and reduced the burden on the vast majority of American families," said Bentsen.

The House Democratic proposal could pass the House next week because of the Democratic majority there. Combined with measures being worked out by congressional committees, it is designed to reduce the federal deficit by $40 billion this year and by $500 billion over five years. But it will be among many plans that could be offered on the House floor, and even if it passes would need to be reconciled with the Senate version.

The proposal by Democrats on the House Ways and Means Committee would cut the federal deficit by $22.4 billion this year and $148.6 billion over five years. Other savings would come from other committees' actions.

The Democratic plan would grant taxpayers a $100,000 lifetime capital gains tax exemption, which would apply to the sales of assets such as houses, farms, businesses and timber but not to stock transactions.

In addition, the Democratic plan would allow all but wealthy taxpayers a $1,000 per year capital gains tax exclusion for the sales of most assets, including stocks.

To make up revenue lost by abandoning an increase in gasoline taxes, the Ways and Means plan would delay for one year the indexation of personal income tax exemptions, which would cost taxpayers $17.5 billion over five years. Personal exemptions now rise with inflation each year.

In combination with its decision to drop a 3-cents-a-gallon increase in gasoline taxes that had been proposed in discussions earlier this week, the package is designed to court the support of what Ways and Means Committee Chairman Dan Rostenkowski (D-Ill.) called "the people who are the backbone of the country, the middle class."

The Ways and Means plan is the centerpiece of a Democratic proposal that is one of several competing budget plans likely to be presented to the full House next week, just days before the Oct. 19 deadline for Congress to complete its budget work in order to avoid another federal government shutdown.

As a backup, the full Ways and Means Committee also has devised a stripped-down version of the failed budget-summit agreement that, unlike the Democratic plan, does not raise tax rates on the nation's wealthiest taxpayers or cut capital gains taxes.

The Senate panel voted 15 to 5 for its plan, with Sens. Max Baucus (D-Mont.), Bill Bradley (D-N.J.), William V. Roth (R-Del.), William L. Armstrong (R-Colo.) and Steve Symms (R-Idaho) opposed.

"I'm convinced this is really dumb . . . to raise taxes on the brink of a recession," said Armstrong just before the vote. But Sen. David L. Boren (D-Okla) contended it would be "playing Russian roulette" with the economy, with potentially even more devastating results, to reject the plan.

The Senate proposal would raise the gasoline tax from 9 cents to 18 1/2 cents a gallon and limit deductions for taxpayers earning more than $100,000 a year. It would raise from $51,300 to $89,000 the amount of income subject to the payroll tax to fund Medicare and cut the Medicare program by $49 billion, with most of the cost borne by health-care providers. But for recipients, the annual deductible for doctor bills would double from $75 to $150.

The Senate plan also includes an increase in the earned income tax credit for lower-income families, a key element in pending child-care legislation. A dispute over the child-care provision was a major cause of delay in daylong deliberations over the plan by White House and Senate leaders, sources said.

The plan, which Bentsen sponsored, more closely paralleled the budget-summit agreement rejected by the House but with modification of some of the summit package's most controversial features, such as the proposed tax on home heating oil and a delay in payment of unemployment benefits.

As House Democrats from all wings of the party lined up in support of the latest Ways and Means tax package, House Republicans squabbled among themselves over whether to propose an alternative next week, and if so, what form it should take.

"There's division within the ranks whether you should have {an alternative} or not," said House GOP leader Robert H. Michel (Ill.). A core of about 50 of the House's 176 Republicans, said Michel, oppose any plan with "one nickel's worth of taxes."

The debate among Republicans centered on whether their party would benefit more from proposing an alternative containing a capital gains cut, a modest increase in income tax rates for wealthy taxpayers and steep domestic spending cuts or from merely opposing the Democratic package.

"Nobody knows how to proceed," said Rep. Don Sundquist (R-Tenn.). "We're not for taxes and we are for solving the deficit."

Rep. Guy Vander Jagt (R-Mich.), the chairman of the National Republican Congressional Committee, emphasized the political stakes in the budget battle just a few weeks before the Nov. 6 congressional electons. "I don't think it matters much as long as we are against theirs," said Vander Jagt of the Democratic plan. "It's their paternity, and they can walk with it to Election Day."

Against the backdrop of confusion earlier this week over whether Bush would accept higher income tax rates in exchange for lower capital gains taxes, Democrats were enjoying a rare moment of fiscal unity.

"At the moment we are just happy to have a bill we can stand behind," said Rep. Vic Fazio (D-Calif.) as he emerged from a House Democratic Caucus meeting yesterday.

Rep. Ed Jenkins (D-Ga.), a southern moderate who serves on Ways and Means, predicted that Democrats from his region would support the plan enthusiastically. "They'll be for it," said Jenkins. "It's a good balanced package."

In embracing the plan, Democrats are gambling that voters have reconciled themselves to higher taxes and shifted their attention to who will be taxed. Compared to the budget-summit agreement negotiated between the Bush administration and congressional leaders, the new plan is skewed much more heavily against upper-income taxpayers.

More than half of the roughly $160 billion in higher taxes would come from upper-income taxpayers, in the form of a 33 percent marginal rate rather than the current 28 percent rate, a 10 percent surtax on millionaires and an increase in the alternative minimum tax. In addition, the plan would achieve $43 billion in Medicare program savings, compared to $60 billion in the summit agreement, and only $10 billion of it would come from beneficiaries.

The tax portion of the package would raise the average tax bill of the richest 1 percent of taxpayers by about $11,000 and lower taxes on the poorest 20 percent of taxpayers by about $22.

A part of the same deficit-cutting process, House and Senate conferees last night met a budget-reduction target set by Congress earlier this week by agreeing to a package that would slash $13.6 billion from farm spending over the next five years. The measure dramatically cuts subsidies and reduces other farm programs.

"I'm satisfied that we were fair," said Senate Agriculture Committee Chairman Patrick J. Leahy (D-Vt.). "I'm not happy that we had to cut so much . . . , but I can tell farmers that they were treated fairly."

Leahy and other Senate Agriculture Committee members met with counterparts from the House and with Agriculture Secretary Clayton Yeutter for about four hours last evening before emerging from a closed Capitol hearing room with a budget package that would save more than $1 billion in fiscal 1991.

"In my judgment, we've done as well as could be expected with such enormously difficult policy issues," Yeutter said.

The agreement is expected to form the basis of commodity provisions in the 1990 farm bill under negotiation concurrently with the budget talks.

Staff writers Guy Gugliotta and Don Phillips contributed to this report.