DES MOINES, NOV. 19 -- Former Arizona governor Bruce Babbitt proposed today that wealthy retirees who draw Social Security pay more taxes on that income, but he and four rivals for the Democratic presidential nomination emphatically rejected any cuts in cost-of-living adjustments (COLAs) in Social Security as a means of helping reduce the federal budget deficit.

The five presidential candidates, in a two-hour forum here sponsored by the American Association of Retired Persons (AARP), generally agreed on most of the issues confronting the elderly, including the need to improve long-term nursing-home and catastrophic-illness care, restructuring of Medicare and encouraging people to participate in health insurance plans that emphasize preventive care.

The participants were Babbitt, Massachusetts Gov. Michael S. Dukakis, Rep. Richard A. Gephardt (Mo.), Jesse L. Jackson and Sen. Paul Simon (Ill.). AARP audiences in other states saw the forum by satellite transmission.

Only two of Republican candidates, Rep. Jack Kemp (N.Y) and former Delaware governor Pierre S. (Pete) du Pont, have agreed to participate in a similar forum Friday.

Babbitt's proposed means test, which primarily would involve increasing the taxes on the Social Security benefits of recipients whose income is above a certain level, was greeted coolly by the 1,200 AARP members in the audience even though he said the funds would be used to improve government health programs. Up to one-half of Social Security benefits are now taxable for upper-income retirees.

"Why do we have a system in which the Mellons and the Vanderbilts get tax-free income?" Babbitt asked. "I'd set a 'needs test,' a threshold of $100,000 or $75,000 a year, somewhere in there, above which Social Security benefits are taxable."

None of the other candidates embraced Babbitt's proposal.

"If you set an income above a certain amount, the program is less Social Security and more like welfare," Jackson said.

Babbitt also accused the Reagan administration and Congress of being "gutless wonders" who would not deal with the budget deficit and now are "talking of cutting COLAs." The others agreed.

"The Social Security fund is building a huge surplus. And it would be wrong and immoral to cut it to compensate for mistakes in other areas of the budget, such as defense spending," Gephardt said. "I'll take Social Security out of the budget so people won't be tempted by it," he added.

The forums are the most visible events of the $8 million -- $3 million this year, $5 million in 1988 -- nonpartisan AARP/VOTE political education program, which is among the most sophisticated and intense interest-group programs both in Iowa and nationwide.

The primary goal of AARP, which is the largest interest group in Iowa, is not to endorse one candidate but to pressure all of them to address the organization's primary issues -- controlling health-care costs, improving long-term health care and ensuring the security of retirement benefits -- and to get them into the parties' 1988 platforms.

AARP leaders hope to turn out 20,000 additional members to the caucuses, 10,000 in each party. Each party anticipates at least 100,000 participants.

AARP held nine workshops around the state between mid-September and mid-October to teach people how to participate in the Iowa caucuses. They had hoped to attract 1,000 participants but got twice that number, according to Bob Canavan, national director of AARP/VOTE.

AARP also has a $150,000 television ad campaign in Iowa and a $250,000 budgeted for New Hampshire this month to air television commercials urging the elderly to participate in the caucuses and primaries, to push the candidates on their issues and to remind them that the 27 million members of AARP can make a difference. The next stage is to recruit precinct leaders and to organize turnout.

AARP's campaign stems from similar efforts in six states that had senatorial races last year. "We had Richard Wirthlin {President Reagan's pollster} do a follow-up poll on last year's program. And he found that 6 percent changed their votes because of it," said Les Francis, AARP's political consultant. "That's a 12-point swing. And it was bipartisan -- it helped {Democrat} Tim Wirth in Colorado and {Republican} Christopher Bond in Missouri."

Other groups in Iowa have or are planning similar, if less intense, programs. The 31,000-member Iowa State Education Association, which was heavily represented at the Democratic National Convention in 1984 -- about half the state's delegates were ISEA and AFL-CIO members -- had 62 open hearings around the state in October and sponsored a televised Democratic debate this month. It plans caucus workshops as does the state AFL-CIO, which has about 100,000 members, and the state Farm Bureau, with a membership of about 150,000.