Bush Unveils Tax Cut for Small Businesses : Economy: He says his program would save the firms $28.1 billion over five years. He portrays himself as the candidate of ‘Mom & Pop Inc.’

STATE COLLEGE, Pa. — Warning of “misery on Main Street” if Democrat Bill Clinton wins the White House, President Bush on Wednesday unveiled a tax-reduction plan for small businesses and repackaged previous proposals as he portrayed himself as the candidate of “Mom & Pop Inc.”

The White House said the President’s proposals would save small businesses--and cost the U.S. Treasury--$28.1 billion over the next five years. The White House said the program’s cost would be covered by the $132 billion in budget cuts called for by Bush.

“I see small business as the backbone of the American economy. My opponent, Mr. Clinton . . . sees small business as the goose that lays the golden eggs,” Bush said.

Most of the tax savings would come from programs already announced, and a senior Administration official said after Bush outlined his plan in a speech to business executives in Greensboro, N.C., that it was “fair criticism” to suggest that most of the program represented “repackaging.”

Meanwhile, the President’s campaign sought to build on Bush’s efforts to raise questions about his rival’s intentions by broadcasting a new television commercial in several key battleground states that targets Clinton’s record on taxes.

Bush aides last week said the campaign planned to launch an ad about Clinton’s draft record and they said Wednesday it remained under consideration. White House Press Secretary Marlin Fitzwater, continuing the drumbeat on the issue on a day Bush did not refer to it directly, flatly accused Clinton of lying about his efforts to avoid military service during the Vietnam War.

But public opinion polls have shown most voters are not overly concerned about the draft issue, and Bush senior campaign adviser Charles Black said Wednesday that the President and his team recognize that “the fundamental debate is on the economy.”

Although Bush himself has acknowledged that many voters have been disappointed by his record on that issue, he and his campaign aides apparently believe that by talking frequently about economic matters--and hammering away at Clinton’s proposals--they can make some headway.

“We know from our research that people are not enamored with (Clinton’s) economic plan once they know what it is,” Black argued. “And when they know the records . . . people will choose Bush’s economic plan.”

Reflecting that strategy, Bush on Wednesday touted his plans to aid small businesses--and depicted Clinton as a threat to them--before two audiences in North Carolina.

The President’s political focus on small business is based on the expectation that it can enhance his appeal not only to the owners of such firms, but also to their employees. At the same time, getting small business back on its feet is seen as crucial to reviving the nation’s economy.

The President on Wednesday also addressed several thousand students at a sun-drenched rally on the Old Main lawn at Penn State University and then headed to Camp David, Md., for a break today from the campaign trail.

Bush defeated Democrat Michael S. Dukakis in both Pennsylvania and North Carolina four years ago. But in a sign of his political troubles nationwide, polls show Bush trailing Clinton in Pennsylvania and locked in a close race with the Democrat in North Carolina.

One of the two new elements in the small business economic plan Bush spotlighted would allow the immediate write-off of up to $2,500 in the costs of starting a new enterprise, rather than spreading these costs out over multiple years. A senior Administration official said this proposal would require no congressional action and White House aides said it would cost the government a relatively modest $500 million over five years.

In addition, Bush called for the elimination of taxes on capital gains from newly issued small business stock, at a cost to the Treasury of $700 million over five years. This is intended to make investment in new small businesses more attractive.

Other measures, already proposed, would reduce the lowest corporate tax rate to 10% from 15%, allow the self-employed to deduct 100% of their health insurance premiums, provide tax credits to help smaller companies meet the costs of giving employees leave to meet family emergencies and increase to $25,000 from $10,000 the amount of business expenses that smaller firms can deduct from their business taxes.

The reduced tax payments would come not only from increased deductions and lowered tax rates, but from simplified paperwork that, the White House said, would make it easier for businesses to claim tax savings to which they are entitled.

In his remarks in North Carolina, Bush contended that Clinton would impose a litany of taxes if elected, saying: “It’s taxing just to talk about this whole program ahead. Somebody said, ‘that taxes my memory.’ And Clinton says, ‘that’s a good idea, let’s try it.’ ”

According to Bush, in order to meet the cost of payroll taxes he said Clinton would impose to pay for health care and job training plans the Democrat has proposed, small business would have a choice: “You can board up the windows or you can get out the pink slips. You can continue to operate, but to do so you’re going to have to lay off some of your rather small work force.”

He also said, “Bill Clinton’s got a ‘punt, pass and kick’ plan: Punt the problem over to business. Pass the costs along. And kick the American worker, right where he carries his wallet.”

Clinton, who also proposes economic incentives for small businesses, has disputed that his health and job training programs would put people out of work.

At his Penn State appearance, Bush was introduced to cheering students--and a vocal minority of Clinton supporters--by the school’s longtime football coach Joe Paterno.

Bush beamed at Paterno and, for good measure, he also saluted “that world-renowned baton twirler, John Mitchell,” a campus star of sorts for his role in the university’s marching band.

“Real talent,” Bush said.

Times staff writer Thomas B. Rosenstiel contributed to this story from Washington.