I was really stumped by this one, but I selected (A), mostly because of the phrase "...if enacted".

The "disastrous effect on Wall Street trading and employment" would result if something is enacted.
What can be enacted? Laws, policies, regulations...proposals?

This is where I differentiated between the act of taxing - in of itself - and the proposal to tax.
Is taxing being enacted, or is that the result of a proposal that has been enacted?
I went with the latter, so I eliminated (C), (D), and (E). I was left with (A) and (B) because I concluded that a direct reference to a proposal was needed as the basis for the later phrase "...if enacted".

Of (A) and (B), I thought "proposal to tax" was more idiomatically correct than "proposal of taxing", and I didn't think "may be" was necessary after "its merits".

Let the onslaught of disagreement begin!

I think the answer should be E

A its merits, the proposal to tax --- to be verb is required and its is again a prob
B its merits may be, the proposal of taxing - its is a prob
C its merits as a proposal, taxing - its is a problem
D the proposal's merits, to tax -- to tax is wrong
E the proposal's merits are, taxing -- correct , to be verb are and taxing away xyz becomes subject

pls correct me if i am worng

I think Tomada hit the nail on the head.

Although I do not have an official explanation, the correct answer is A. The key is to have a correct modifying phrase for - if enacted.

,taxing away ......, if enacted is incorrect. It should read - , the proposal to tax ......, if enacted,

Discussions are welcome.

winner's attitude wrote:I think the answer should be E

A its merits, the proposal to tax --- to be verb is required and its is again a prob
B its merits may be, the proposal of taxing - its is a prob
C its merits as a proposal, taxing - its is a problem
D the proposal's merits, to tax -- to tax is wrong
E the proposal's merits are, taxing -- correct , to be verb are and taxing away xyz becomes subject

pls correct me if i am worng

Why is "its" a problem. I think it clearly refers to the proposal without ambiguity.

The key here lies in "if enacted"

Option A - "The proposal to tax" can be enacted.
B - "the proposal of taxing" is incorrect.
C, D, E - "taxing" or "to tax" cannot "be enacted"