Gephardt Unveils His Entry in Washington Tax Cut Derby : Congress: His ‘working people’s agenda’ challenges both the GOP and Clinton. Plan has no specifics on where to reduce spending.

Just two days before President Clinton is to unveil his legislative priorities for 1995, incoming House Minority Leader Richard A. Gephardt (D-Mo.) offered his own proposals for a middle-income tax cut--challenging both the GOP majority and the leader of his own party.

Gephardt’s “working people’s agenda,” the most explicit Democratic response yet to recent Republican proposals, includes a “substantial” tax cut aimed at workers earning up to $75,000.

The Missouri congressman offered no specifics about the proposal, and acknowledged that he had not yet figured out what spending cuts to make to pay for his tax reduction plan. “We will look up and down every section of the budget to come up with the funds to do this,” he said. Gephardt also proposed using government incentives to encourage companies to give workers a greater share of profits resulting from rising productivity.

He mentioned Clinton’s name just once in his 30-minute address to the Center for National Policy, a Democratic think tank. He promised to cooperate with the President, but added: “Our agenda will come from America’s houses, not the White House.”

The remarks echoed those of the new Democratic leader in the Senate, Tom Daschle of South Dakota, who also has promised to work with White House officials, but declared: “We will not be led by them.”

The attempt to distance Democratic congressional leadership from Clinton reflects the broad change that the Republican election victory wrought on Capitol Hill--particularly in the House, where Democrats had been in the majority for 40 years. It also illustrates the profound concerns Democratic congressional leaders have about linking their party’s political fortunes to the White House.

Gephardt contrasted his tax cut proposal, which would apply to families with or without children, to the GOP’s plan to provide a $500-per-child tax credit for people with incomes of up to $200,000 annually.

“So the American people will have a choice between two tax cuts,” he said. “The Republican tax cut, which gives a tax rebate for every child of the rich; or the Democratic tax cut, which says that all working people deserve a break--not based on the size of the families, but based on the size of their incomes.”

Gephardt’s corporate profit-sharing plan was similarly intended to buttress the party’s appeal to working people. He noted that industrial productivity increased 18% in the last 12 years, while real wages dropped by more than 4%.

“We’ve got to recognize that a company’s shareholders are not the only stake-holders,” he said.

He did not explain, however, what incentives he would offer to get companies to let their employees share in their profits.

In addition, Gephardt sought to undercut the GOP’s much-heralded plan to adopt a constitutional amendment requiring a balanced federal budget. He said he will introduce an “honest budget bill” requiring Republicans to explain exactly what steps they would take to balance the budget.

“We won’t delay their vote on the amendment,” he said. “But neither will we allow them to balance the budget on the backs of working people and senior citizens.”

Asked about the extent to which he consulted with the White House before the speech, Gephardt said: “We’ve been talking about the budget and about taxes for the past couple of weeks. They haven’t figured out what they want to do, and we haven’t figured out exactly what we want to do.”

At the White House, Clinton met throughout the day Tuesday with aides, who presented him with a variety of options for a middle-class tax cut--as well as ways to pay for it.

Officials said the tax cut likely would amount to about $50 billion over five years and be limited to families with incomes of less than $100,000 a year.

Aides said Clinton was looking to pay for it through “dramatic cuts” in spending on domestic programs and substantial restructuring of numerous government agencies.

The President reportedly remained undecided Tuesday night over which recommendations to adopt.

Although Administration officials had considered outright elimination of one or more Cabinet departments, that option looked increasingly remote.

“That’s not really the issue,” one knowledgeable aide said. “We are not simply looking at what we can eliminate. It’s been a far more serious look at what departments and agencies do.”

White House officials cautioned that Clinton’s speech Thursday from the Oval Office would be more thematic than specific.

The address was described as an attempt by Clinton to “reconnect” with middle America by returning to the themes that won him the presidency--work, family and personal responsibility.

“The notion that somehow the President needs to change is not right,” said political adviser Paul Begala. “The President is doing all the right things. He just has to link up with the voters again. That’s what the speech is about.”

In his address, Gephardt also delved into thematic areas normally reserved for presidents, offering his own definition of the party.

“This election may have been a harsh rebuke of our party, but it was far from an embrace of theirs,” Gephardt contended.

“At the ballot boxes, we may have lost the majority. But in the hearts and mind of working America, the values we stand for--the policies we fight for--are still in the majority,” he said.

For their part, Republicans sought to counter the Democratic tax cut initiative by accusing them of being copycats.

“We’re glad that the Administration and the Democrats are finally getting the message--there is a need out there,” said Sen. Thad Cochran (R-Miss.).

Cochran noted that “candidate Clinton committed himself to a middle-class tax cut and one never really materialized.”

Gephardt also announced a new Democratic leadership structure, describing it as “the largest, the most diverse and the most inclusive in the history” of the House.

One of the most thankless jobs--chairman of the Democratic Congressional Campaign Committee--went to Martin Frost of Texas, who is known both for his keen political instincts and a strong will.

The four chief deputies to Minority Whip David E. Bonior of Michigan will be Rosa DeLauro of Connecticut, Chet Edwards of Texas, John Lewis of Georgia and Bill Richardson of New Mexico.

They will also join Gephardt as members of a newly formed Democratic Policy Committee, which in turn will have three “special teams” of vice chairs.

In charge of research will be David R. Obey of Wisconsin and Eva Clayton of North Carolina; in charge of policy will be George Miller of Martinez, Calif., and John M. Spratt Jr. of South Carolina; and in charge of communications will be Richard J. Durbin of Illinois and Kweisi Mfume of Maryland.

Gephardt also announced the creation of a Leadership Advisory Group, whose members include Charles W. Stenholm of Texas, John P. Murtha of Pennsylvania, Patricia Schroeder of Colorado, Louise M. Slaughter of New York, Louis Stokes of Ohio, John D. Dingell of Michigan, W.G. (Bill) Hefner of North Carolina and Ed Pastor of Arizona. The next chair of the Congressional Black Caucus also will be a member.

Times staff writers John M. Broder, Ronald Brownstein and Edwin Chen contributed to this story.