Retired GP Owen Lister made his sick suggestion to fellow councillors as they discussed sending the youngsters to a £3,000-a-week care home.
Mr Lister, 79, told them: “I would guillotine them.”
He has now quit as deputy mayor but yesterday stood by his outburst.
He said: “I indicated at that point that perhaps the guillotine might be better. These are children you can’t educate.
“It’s merely a matter of caring for them until they die. The only difference between a terminally ill patient and a severely handicapped child is time.”
The councillor, of Swindon, Wiltshire, argued the funds should instead be used to cut NHS waiting lists.
He added: “It shows how peculiar we are as a society on this matter that we spend this vast amount of money caring for disabled youngsters to very little purpose at all.
“It would be better spent on those who might actually benefit, such as cancer sufferers.
“We have 5,800 people waiting to go into hospital in Swindon. A percentage of those will die as a result of waiting too long.”
His remarks came as the borough council’s children’s committee debated putting youngsters in a Cornwall home.
Labour councillor Fay Howard said: “There was a slight pause and looks of disbelief. Everyone was totally shocked.”
Labour colleague Barrie Thompson, the committee’s vice-chairman, likened Lister to one of Hitler’s henchmen.
He said: “The last time I heard remarks like that were from Heinrich Himmler.”
And the Disability Rights Commission added: “It’s chilling that an elected representative with responsibilities for deciding on support to disabled n should view the slaughter of innocents as legitimate public comment.”
Mr Lister also quit the children’s committee and now faces a council probe.
A council spokeswoman said: “He recognised he’d said something deeply inappropriate that could cause offence and resigned straight away.”