W. Michael Blumenthal, the feisty former Treasury secretary who now pilots the Burroughs Corporation, sat in the Washington spotlight last week for the first time since he was jettisoned from Jimmy Carter's ship of state in 1979. He called Reagan's proposed budget ''unbelievable, unworkable, and unjust,'' then said the tax cuts should have been more skewed toward business.
''Go easy on the business sector'' when considering tax increases, Mr. Blumenthal told the House Ways and Means Committee. ''You weren't that generous with (business) in the 1981 cut.'' It proved to be a controversial idea.
The former Treasury chief began his appearance with window-rattling rhetoric about Reagan's proposed spending cuts. He called them ''worrisome and unrealistic,'' and said they ''lack credibility and defy basic economic common sense.''
''Use of the word 'depression' may no longer merely be a slip of the tongue, '' he said, going on to recommend defense spending reductions so all the budget cuts wouldn't land like a falling safe on the backs of the truly needy.
He then said the tax cut was ''not Congress's finest hour''; that certain features are just plain wrong and must be corrected if the economy is to stand up on its feet.
Historically, the former Treasury secretary claimed, a quarter to a third of a package of tax reductions have been granted to the business sector. But the ' 81 act broke this tradition, he said. Business will get 28 percent of the revenue the government is giving up this year, but its share of the tax savings will drop to 20 percent in '83 and 18.8 percent in '84, according to Blumenthal.
''To get this economy moving requires investment in the future,'' he told the committee. ''Investment in the future requires cash flow to put into new plant and equipment. If you were willing to give up that much tax revenue, you should have given more to business.''
He did not recommend that business be given new tax breaks. Nor should Congress rescind any existing tax breaks enabling business to recover rapidly the cost of expenditures on plant and equipment. Rather, he said, Congress should search for deficit-reducing revenues elsewhere.
''We should consider reducing and/or deferring those cuts for individuals presently scheduled to go into effect in '83 and '84 for all but possibly the lowest income groups,'' he said.
Blumenthal also criticized the provision that indexes income tax brackets to inflation, claiming it locks in rising prices by removing the incentive to fight them. He said the finance minister of inflation-racked Brazil had warned him against that very measure.
The House Democrats who showed up for the hearing seemed a bit startled by Blumenthal's pro-corporate pitch. ''You mean we didn't give enough to business?'' asked Rep. J.J. Pickle (D) of Texas.
The Congressional Budget Office estimates corporations paid 17 percent of the money taken in by the Treasury in 1970, with their share gradually declining to 10 percent in 1981. Such figures have prodded the Ralph Nader group, Public Citizen, to pump out press releases claiming the '81 tax cut has virtually eliminated the corporate tax. A spokesman was highly dubious about Blumenthal's conclusions.
''I couldn't disagree more,'' says Jay Angoff, a Public Citizen lawyer. ''Business taxes have gone consistently down over the last 10 years as a percentage of total tax revenue. This illustrates the depressingly bad shape the Democratic Party is in. I doubt very seriously that Democrats will accept this, even Ways and Means Democrats.''
Business community reaction, as expressed by a senior tax economist of the US Chamber of Commerce, was circumspect.
''We think (the '81 tax bill) was one of the best pieces of tax legislation in a long time,'' says Ken Simonson, a chamber economist. ''We think it ought to be preserved. Our recent board meeting affirmed our stand against any tax increases.
Blumenthal went on to propose energy and other consumption taxes, and said a timid Congress should puff up its political courage and attack ''the over-indexation of federal pension programs and of social security,'' as well as bloated ''entitlement'' programs such as food stamps.
Blumenthal can propose such measures without fearing the angry swarm of voters they would certainly arouse. ''I recognize that these are not easy matters to deal with,'' he said blandly. ''You're the politicians. Fortunately, I'm not.''