DES MOINES, JULY 28 -- Democratic presidential candidate Bruce Babbitt today proposed imposing a federal sales or consumption tax of about 5 percent to raise $40 billion to cut the U.S. budget deficit.

The former Arizona governor admitted the call for a new tax is politically risky and likely to draw fire from his competitors.

But he said he hopes the proposal will end the "spirit of evasion" that is dominating the campaigns of other Democratic candidates.

"The candidates are all walking around this budget deficit, talking in code language and evading the issue," Babbitt said during the taping of a television show here.

"If we are really serious about this budget deficit and really believe in America. . . it requires both cuts and more revenues," he said.

Babbitt said he would make the consumption tax progressive by exempting "things like food, medicine, perhaps even housing."

Another way to reduce the impact on low-income Americans would be to increase the standard federal income tax deduction, he said.

"One way to keep a sales tax or consumption tax progressive is to increase that credit," he said, without going into detail. "I think the principle is more important than the specifics."

Babbitt, who said he will formally unveil the plan Thursday, said any tax increase would be directly linked to a reduction of the federal deficit, which he said is "robbing from the future of our children."

Iowa Attorney General Tom Miller, chairman of Babbitt's Iowa campaign, admitted Babbitt will draw criticism for his proposal.

There is a widespread belief among Democratic political professionals that Walter F. Mondale's call for a tax increase to reduce the deficit became a major liability in his 1984 presidential campaign.