2 CANDIDATES HONE THEIR TAX-CUT POSITIONS.

Byline: Alison Mitchell and David Rosenbaum The New York Times

When George Bush broke his ``Read my lips, no new taxes'' pledge in the spring of 1990, many Republicans lamented that he had handed away the Reagan legacy.

Two years later, Bush was defeated by Bill Clinton, a Democrat who ran on a platform that promised tax breaks - a middle-class tax cut, he called it. But Clinton, too, made a turnaround once in office and put into place a deficit-reduction plan that included large new taxes.

Now, as the 1996 presidential campaign moves into its final five months, both parties are once again homing in on tax cutting as a far more appealing economic theme than deficit reduction. President Clinton hopes to avoid the tax-and-spend label that Republicans like to pin on Democrats. And Republicans want to return to the theme that proved so successful for them under Ronald Reagan.

Aiming to unveil an economic plan around the time of the Republican convention, aides to Bob Dole are drafting a tax plan they hope will be as bold and popular as Reagan's call in 1980 for an across-the-board tax cut. Their problem is to do so without making a mockery of Dole's long record of fighting doggedly for deficit reduction.

Meanwhile, launching a series of pre-emptive strikes, Clinton has thrown his support behind Republican proposals for a repeal of the gasoline tax increase he sponsored in 1993 and for a tax credit to help offset adoption expenses. He has also called for small businesses to receive a 10 percent income tax credit for employee education and training.

Last week, after a struggle inside his administration, Clinton came out with a tax credit proposal designed to make the first two years of community college virtually free for those who maintain good grades.

Although neither side in the presidential campaign has yet to tip its hand completely on tax policy, a clear choice seems to be emerging.

Clinton advocates limited tax breaks designed to assist the middle class and the working poor, with special attention to child rearing, job training and education.

Dole has already proposed a $500-a-taxpayer credit for contributions to charities that help poor people. But, seeking to draw a sharp distinction with Clinton, he is also examining far more sweeping proposals: everything from an across-the-board income tax cut to some kind of tax system with fewer brackets and lower rates. He has said that the country should ``scrap the current tax code and start again from scratch.''

Both candidates' approaches raise doubts among many mainstream economists. In Clinton's case, the analysts say tax breaks are an inefficient way to accomplish social goals like better education. In Dole's case, they worry that politically acceptable spending cuts could never be found to offset large tax cuts and that the consequence would be the reversal of progress that has been made in deficit reduction.

Ross Perot, the Texas billionaire who grabbed 19 percent of the vote in the last presidential race, last week upbraided both men for their tax cut fever. ``Take a poll, find out what you want to hear and tell you that, and get elected, and don't do it,'' he said.

But the political appeal of tax cutting is apparent.

``It's clear from polling that if you put a candidate who is for some kind of tax cut against a candidate who opposes any tax cut in the name of deficit reduction, the candidate who opposes the tax cut loses,'' said one Democratic consultant. ``At a strategic level, it's very important not to fall into this tax trap.''

From the Republican perspective, Sen. Spencer Abraham of Michigan, a close associate of Dole's, said: ``I want to have a tax debate. I think it will help focus the country on the differences between Bob Dole and Bill Clinton and where they would take the country.''