ALBANY – In quietly naming six advocates of tax cuts to a commission aimed at overhauling the state’s tax structure, Governor Pataki is setting the stage for what could be a dramatic effort to reduce and simplify the tax burden in New York.

The commission, announced in broad form during Mr. Pataki’s January budget address, has taken shape in recent weeks with the appointment of several economic heavyweights of the tax-cutting variety. It could propose measures as sweeping as a repeal of the estate tax or the taxation of capital gains at a lower rate, sources close to commission discussions said.

Mr. Pataki, a Republican who rose to office in 1994 largely on the promise of tax cuts, followed through on his pledge early on but in recent years has made a number of reversals. Lately, he has sought to restore his image by referring to New York State as the “tax-cutting capital of America” and by claiming credit for lightening the state tax burden by billions of dollars.

Mr. Pataki named the members of the state Commission on Tax Reform and Simplification two weeks before telling reporters here that he has not ruled out running for a fourth term as governor or making a run at the presidency.

“I will make a decision within the next few months,” he said yesterday.

Widely regarded as too liberal on social issues to win a national primary on the Republican line, Mr. Pataki may be elevating his profile as a fiscal conservative in an effort to overshadow that weakness. The tax commission, directed by a television commentator and former economic adviser to the Reagan administration, Lawrence Kudlow, could aid that effort.

In addition to Mr. Kudlow, it includes another former Reagan administration adviser, Stephen Entin; a prominent tax lawyer who advises New York City corporations on policy, Peter Faber; Mr. Pataki’s chief economist, Stephen Kagann; a co-chairman of the Shadow Open Market Committee, Charles Plosser; a former senior economist at the Federal Reserve Bank, John Ryding, and an author on state fiscal policy, Robert Ward.

All six – with the possible exception of Mr. Faber, who as chairman of the tax committee at the Partnership for New York City has at times supported tax increases – are associated with the so-called supply-side economic theory that broad-based tax cuts drive private job growth. The group has been asked to generate a report that Mr. Pataki will present to lawmakers as an outline for reforming the state’s tax structure.

“I am confident the Kudlow commission will come forward with a very good concept as to how to restructure the tax code for the 21st century,” Mr. Pataki told The New York Sun yesterday. “Our job will be to implement that and turn it into law, and that’s a challenge, but it’s an exciting one. And I’m looking forward to that challenge.”

The commission’s first meeting took place at the Union League Club at Manhattan last month, with Mr. Kudlow assigning commission members individual tasks. Sources familiar with the discussions said the group was asked to be bold in thinking about ways to simplify a tax code that requires corporations to determine their taxable income four different ways before pinpointing which is highest, among numerous other quirks.

A commission document already in the works will detail the history of the New York economy as it relates to tax increases. The briefing is expected to demonstrate that private sector growth, particularly in New York City, is directly related to tax cuts. The paper will argue that the two most dramatic periods of growth in the city over the last 50 years took place following federal tax cuts by President Reagan in the mid 1980s and state tax cuts by Mr. Pataki in the late 1990s.

Sources familiar with the commission discussions agreed that taxes on stock dividends, capital gains taxes, or taxes on profits from the sale of assets, and the estate tax, which some believe has resulted in an accelerated out-migration of older residents to states like Florida, would be obvious targets of the commission. One commission member, who asked not to be identified by name, said every rise in capital gains taxes has been accompanied by a weak financial market.

Mr. Entin, who recently delivered testimony before a federal tax restructuring commission created by President Bush, said it is too early to say what recommendations the New York commission will make. Mr. Entin’s testimony before the president’s advisory panel focused on the advantages of a system that is neutral in its treatment of income used for investment and consumption.

“Under the current system, the income tax falls more heavily on income that is used for saving than income that is used for consumption,” he said. “We would suggest a system that does not discourage saving and investment.” Mr. Entin, director of the Washington, D.C-based Institute for Research on the Economics of Taxation, said New York suffers from a number of small taxes on specific behaviors that “seem to be adding needless complexity” to the system.

Since 1989, New York has treated capital gains and dividends as personal income, taxing them at the same rate as all other income. Commission members are expected to advise either lowering that tax or eliminating it altogether. Those who advocate the elimination of capital gains taxes say the practice discourages investment by taxing it at the same rate as consumption. They say increased investment now would lead to increased future consumption.

Mr. Bush won a decrease in the federal tax rate on capital gains to 15%, from 20%.

Mr. Pataki fought to retain in this year’s budget the expiration of an income tax surcharge on New Yorkers who earn more than $150,000. Mr. Pataki implemented the increase two years ago during an economic downturn, but said it would expire this year. The Legislature went along with the pledge after weeks of negotiations.

Mr. Pataki also advanced a new corporate tax policy in the state that will result in the taxation of sales only, rather than the traditional formula of sales, assets, and employment. The so-called single sales factor legislation was viewed by business leaders as a boon to businesses across the state. Others said it amounted to a giveaway for businesses.