WASHINGTON — President Bush's economic growth package is likely to seek a $500 to $1,000 boost in the income tax exemption for dependents and to finance the tax break, in part, by cutting Medicare and other entitlement benefits for affluent Americans, Administration sources said Thursday.

The proposed expansion of the personal exemption--aimed at helping the financially strapped middle class--would be the centerpiece of an economic stimulus plan that could cut taxes by more than $50 billion over five years, Administration sources said.

However, Bush has not yet decided on the details of his plan, which will be unveiled in his Jan. 28 State of the Union address, Administration officials cautioned.

They noted, for instance, that Bush has not determined exactly how much the personal exemption should be increased. He also has not determined whether to limit the proposed expansion only to children, or to make a smaller increase in the exemption applicable to all taxpayers.

Under current law, taxpayers claim one $2,300 exemption for every dependent. Increasing the exemption by $500 would lower the annual tax bill of a single filer in the 28% tax bracket by $140. The benefit would increase for taxpayers with more dependents or those in a higher tax bracket.

The package is designed to shore up his standing among middle-class voters, who are increasingly distressed about an economy that the President, talking to voters in New Hampshire this week, agreed is now in a "free fall."

As Bush's popularity in the polls has plunged because of the recession, the White House economic plan has become increasingly important to the President's reelection hopes. In fact, the Administration views the economic package as the central economic manifesto for the Bush campaign, one that will allow Bush to reach out to the middle class while still providing benefits for his natural supporters among the affluent.

Yet as details of Bush's economic package began to emerge in Washington, Democrats in Congress offered their own budget proposals that go much further than those likely to be offered by Bush.

Senate Majority Leader George J. Mitchell (D-Me.) called Thursday for cutting $100 billion from the Pentagon budget over five years and putting aside deficit constraints to heal the ailing economy. Mitchell also repeated the Democratic call for a cut in taxes for the middle class and for tax breaks for business investment and for home ownership.