IMO A,

E does not have a complete main sentence only phrases,

same with C, D

B the proposal of taxing reads awkward the proposal to tax is better in A

This is a good one. The key is to find the subject. In this case it's the tax proposal. Then the verb is effect. Now the "its" is referred to the tax proposal. Because this sentence is a dangling modifier, the preceding clause can't be modified by "its". So, obviously, the noun modified will be in the antecedant clause. In this case the noun modified by "its" is the proposal. The rest of the sentence flows well.

E--is incorrect because it changes the meaning of the sentence. The tax will have a disasterous effect on the stock market, not the merrits. The merrits can be anything. Perhaps the merrit is the government's plan of redistribution of wealth to the poor.