Teamsters and auto workers hee sport bright red buttons that say "Yes" to show support for Mayor Coleman Young's ballot proposal for tax increases and wage cuts to save this economically depressed city from bankruptcy. Members of city employe unions and the AFL-CIO wear black buttons that say "No."

A bitter, racially divided free-for-all, breaking the union front and wreaking havoc with traditional political alliances, has erupted over the proposal, which will be decided by voters here Tuesday.

The referendum, a last-ditch effort by Young to avert a $119 million deficit and almost certain bankruptcy after the fiscal year ends this months, has prompted the rise of various issues and produced a political climate rifle with ironies.

Churchgoing blacks, bankers, realtors and auto magnates are among the principal supporters of the referendum. Young, the city's first black mayor, has made it a referendum on his seven years in office and has brashly appealed to the racial sensitivities of black voters here. The business leaders, who have bankrolled the pro-referendum forces, are grateful to him for the way he has lowered crime and aided their rebuilding of downtown Detroit.

Lined up against are skeptical whites, resentful of Young and his racial appeals, and also angry that government money has gone for construction of shiny new hotels and office buildings downtown while garbage collection and other city services have declined in the neighborhoods. The principal organized opposition has come from the American Federation of State, County and Municipal Employes, the bargaining agent for 9,000 of the 20,000 city government employes.

Polls indicate that the "Yes" forces, bolstered by the favorable sentiment among this city's 60 percent black majority, are ahead. But Young, who campaigned in black churches here over the weekend, is clearly worried that some of his support may be soft and could be overwhelmed by a high turnout of passionate opponents.

Similar measures have been defeated recently in Los Angeles and Toledo.

Young is asking voters to approve raising the income tax on city residents from 2 to 3 percent and the tax on nonresidents who work in the city from .5 percent to 1.5 percent. That would bring $94 million in new revenue to Detroit. The referendum would also force city unions to reopen negotiations and agree to about $76 million in wage concessions.

That has angered AFSCME, which is further chagrined by the support for the measure among fellow unionists in the United Auto Workers.

"They bought the Chrysler package which the mayor is trying to put on us but we're not buying it," said Reggie McGhee of the AFSCME local here.

Today and over the weekend, the issue was fought out in radio and television commercials and talk shows. Both sides handed out brochures and bumper stickers but Young's forces were much more visible and are far better financed.

The campaign has gone on only for the last two weeks, the period following approval of the ballot item in the state legislature in Lansing. There was bitter conflict there with Young and Republican Gov. William Milliken only narrowly defeating the opposition of suburban legislators who opposed the increase in the Detroit commuter tax. They won, in the end, with an unlikely alliance of black Detroit Democrats and rural white Republicans.