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The proposed High Yield Debt Tax would have imposed serious taxes on the bond market by eliminating the deductibilty of interest on debt used for corporate takeovers. The market reacted almost instantly to news of the legislation progressing through Congress and triggered the 1987 crash. Stocks that led the market downward were those most affected by the proposed legislation. While the provision concerning the stock market was stripped out before being enacted into law, it illustrates that Congress need only consider and deliberate bad legislation to destroy wealth in the market.
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