NEW YORK -- In the search for the causes of Black Monday's stock market plunge, officials on Wall Street and in Washington have called each other a lot of names. Some of the names can be printed here.

Wall Street's greed, Washington's folly -- the epithets have been hurled up and down the New York-to-Washington corridor.

And yet of all the issues being debated, none has seemingly stirred more emotion than an obscure tax proposal that floated through the House Ways and Means Committee during the week before the stock market's collapse.

On Wall Street, many senior officials still refer to the proposal as "the spark" that lit a firestorm of panic in the financial markets on Oct. 19. They say that the proposed tax revision, which if enacted would make many corporate takeovers prohibitively expensive, had a profound effect on professional stock investors during the week before Black Monday, triggering a reaction that eventually spiraled into panic.

The issue, simplified, is whether news of the tax proposal during the week of Oct. 12 caused professional speculators to engage in massive sales of takeover-related stocks, pushing the market down and generating a broader panic. Proponents of this theory say fears that the takeover market would be quashed by the tax proposal even affected the stocks of companies not involved in active merger deals. The prices of these other stocks, some Wall Street executives argue, were supported by valuation theories that depended on a booming takeover market.

"It wasn't an accident. This was what knocked the props out from underneath the market," said Guy Wysser-Pratte, head of arbitrage trading at Prudential-Bache Securities. "Somebody pulled the plug on one of the major reasons for the bull market -- the restructuring of corporate America. Somebody found the Achilles heel. ... It was irresponsible."

The takeover tax proposal "caught everybody off guard," said Donald Drapkin, a former top takeover lawyer who is now vice chairman of Revlon Inc., a company active in hostile takeovers. "Just the aura of it carried the market down. ... Forget the deal stocks themselves -- you have to also look at the 50 or more other stocks that were high because investors thought they were great takeover candidates."

Regulators are taking a close interest in this controversial issue. Securities and Exchange Commission Chairman David S. Ruder has said the SEC is investigating the role of takeover stocks in the October decline. Late last week, SEC Commissioner Joseph Grundfest sent a letter to members of the Ways and Means Committee and the Senate Finance Committee stating why he thinks the tax proposal played a significant role in the stock market's fall and recommending that the committees kill the provision before it becomes law.

Grundfest's urging may be moot, however, since congressional insiders say the proposed takeover tax revisions have little chance of passing -- in fact, some say the chances of passage were never realistic.

The proposals would have a sweeping impact. They would raise the cost of most mergers exorbitantly by limiting the deduction of interest expenses to $5 million a year. They would also impose a special tax on successful acquirers in hostile takeovers and would create a 50 percent excise tax on profits from so-called greenmail payments, in which companies pay corporate raiders a premium above stock market prices to back their shares.

The suggestion that these little-known tax proposals, which were far from enactment during the week before the stock market's collapse, could have touched off such an enormous financial calamity as Black Monday strikes many in Washington as absurd. Members of the Ways and Means Committee, who have felt the brunt of Wall Street's criticism, are especially offended.

"I think the statements that have been made by some of the Wall Streeters about the hostile takeovers provision {of the tax bill} are ludicrous," said Rep. Byron Dorgan (D-N.D.). "I think those folks need to get out of the concrete canyon and breathe some fresh air. ... I don't think anybody who's thinking clearly thinks this was a contributing factor."

Another committee member, Rep. Donald J. Pease (D-Ohio), likened Wall Street in the weeks before the market's collapse to "a person on the edge of severe emotional strain, right on the edge of madness, and then some innocent remark by some relative pushes them over the edge." If the tax proposal did play a role in the collapse, he said, "then it is stark testimony to just how sick the market is."

Available evidence, while not conclusive, suggests that there may well have been a link between the takeover tax proposal and the market's steep fall. How important the link was can probably never be measured with precision, financial experts said. In addition, some of the evidence suggesting a link could be explained by other reasons. Still, some regulators consider the evidence worthy of close examination.

The first question regulators must address is whether there was any real difference between the performance of takeover-related stocks and the pattern of the broader market around the time of the collapse.

Comparison of a group of a dozen "takeover" stocks and the Dow Jones industrial average of 30 blue-chip issues indicates that there was such a difference. The takeover group includes issues such as Irving Bank, Newmont Mining and Dayton Hudson that were involved in takeover bids, as well as issues that were awaiting pending acquisitions or were subjects of takeover speculation. Overall, the combined prices for the takeover group stocks starting falling before the rest of the market -- and then fell faster.

During the week before Black Monday, for example, when selling pressure was building toward panic, the takeover group lost 18.5 percent of its value, or about twice as much as the Dow, which lost 9.5 percent. On Black Monday itself, both groups lost almost exactly the same amount, just over 22 percent. But while the Dow bounced back somewhat, ending the week down 13.2 percent, the takeover group stayed down, closing the week with a loss of 20.8 percent.

Moreover, the pattern of the group's performances is suggestive of a link with news about the proposed takeover tax revision.

Between Oct. 1 and Oct. 9, for example, the Dow continued its general pattern of slippage from its August high of 2722. During the period, the 30 industrials lost 5.95 percent of their value, falling more than 100 points, to 2482.21 on Oct. 9.

But during the same period, the takeover group held steady and actually gained a fraction of a percentage point. Absent unusual circumstances, such firmness would be expected, since the prices of active takeover stocks depend more on anticipation of completed mergers at specific prices than on general market conditions.

The steep fall of takeover stock prices did not begin until the next week, when news about the takeover tax proposal began to filter into the market. While the long and complex tax bill was unveiled in the Ways and Means Committee on Tuesday, no formal announcement was made about its takeover provisions.

News about the proposed tax changes spread mainly by word-of-mouth on Wall Street, investors and executives said, and not everyone had solid information about what the bill said or what its full impact would be. The first prominent newspaper report about the provisions did not appear until Friday morning, when the Wall Street Journal carried a well-displayed story that described growing fears among investors about the tax proposal.

That day -- the last trading day before Black Monday -- the group of takeover stocks lost 11.85 percent of its value, or nearly three times as much as the Dow, which experienced its worst one-day point decline up to that point. Volume on the New York Stock Exchange set a record as bearish sentiment set the stage for Monday's panic.

The Dow Jones wire service, a principal source of moment-to-moment news for stock market investors, didn't carry a story about the tax proposals during the week of Oct. 12, according to a Dow Jones librarian.

Reaction to the tax proposal by Wall Street insiders was sporadic and uninformed, officials said. "At first, there was a sort of disbelief," said Herbert Galant, a partner specializing in takeovers at the Wall Street law firm of Fried, Frank, Harris, Shriver & Jacobson. "And then there was, 'Oh my God,' and then you had the 19th."

Only after the collapse, Galant said, did people realize that the tax proposals had little chance of becoming law.

At the time, the selling pressure that built up during the week before Black Monday was attributed to the release on Wednesday, Oct. 14, of unexpectedly negative trade deficit figures. Many market participants said then that the bad trade news touched off a wave of nervous selling in the stock market.

SEC Commissioner Grundfest, however, said he now believes the tax proposal was the most important external factor in the market that week. "The budget deficit is important, it's serious, we have to do something about it, but it wasn't news," he said. "The {tensions in} the Persian Gulf -- look at spot oil prices, they didn't move. The trade deficit figures -- we had those {last week} and we're not going to go down 500 points."

The takeover tax proposal, Grundfest said, while "not news in the sense that you'd see it on the nightly news on TV," had an important impact because it affected "people who are most savvy about valuation and price in the market. ... It was very important among opinion-makers, people who mold perceptions on Wall Street."

How important the impact really was depends in part on an assessment of how much the rapid climb in stock prices during 1987 was related to the boom in takeovers.

Even on Wall Street, there is wide disagreement on this question. Some point to certain characteristics of the 1987 bull market -- the heavy role of institutional investors, the growth of so-called arbitrage speculation in takeover stocks, and the fact that a small group of well-known stocks performed much better than the broader market -- as evidence that takeovers were important in the expanding price bubble.

Wysser-Pratte, the Prudential Bache arbitrageur, said that in his view, three-quarters of all stock prices contained a premium related to expectations about mergers and restructurings.

Others on Wall Street described the impact of the takeover tax proposal more broadly. One senior official compared it to the relationship between president John F. Kennedy's handling of the steel crisis and the fall of the stock market in 1962; the impact was mainly psychological, he said.

The very existence of such a sweeping tax proposal suggested to Wall Street executives that a new, potentially costly antibusiness era was at hand in Washington.

"There was a sense built up that at the margin, the government can do all kinds of things to hurt the investor in tax policy, regulatory policy, controls on the market, etc.," one official said.

Some Wall Street skeptics discount the impact of the takeover tax proposal. They say the sharp drop in takeover stock prices just before Black Monday can be explained by other reasons.

Once the market began to slip at midweek -- whether because of bad trade news or other factors -- professional takeover speculators may have sold their positions faster than others for reasons unrelated to a potential takeover tax.

Such speculators made liberal use of debt to finance their stock purchases, and a general falling market would have put pressure on some to sell stocks quickly in order to pay off the debt.

In addition, some speculators said after the collapse that they had sold large positions in takeover stocks quickly because they wanted to try to lock in profits for the year.

They noted that in 1986, many had seen an entire year's worth of takeover speculation profits evaporate because of the fall of takeover stock prices in the aftermath of former speculator Ivan F. Boesky's settlement with law enforcement authorities.

The fall of takeover stocks late last year, spurred by panic over the implications of Boesky's guilty plea, did not set off a broader market decline, suggesting at the least that takeover stocks do not always lead the broader market.

There are political aspects, as well, to the controversy over the proposed takeover tax changes. At a time of fierce partisanship in the Ways and Means Committee, the revisions were proposed by the committee's Democratic majority, a fact not lost on traditionally Republican Wall Street.

Perhaps more important, the Street's inclination to blame the tax proposal -- and its main sponsor, Ways and Means Chairman Dan Rostenkowski (D-Ill.) -- for the market collapse is seen by some as a direct attempt by powerful investment firms to lobby against this and any other antitakeover revisions.

Even some believers in the tax-effect theory, such as the SEC's Grundfest, say that Rostenkowski has received far too much blame in recent weeks.

Inundated by criticism from Wall Street, Rostenkowski issued a statement 10 days after Black Monday saying that he would reconsider the takeover proposals when the tax bill went to conference with the Senate.

But he denied that the tax proposals had anything to do with the market's fall. A Ways and Means member, Rep. Thomas J. Downey (D-N.Y.), said the takeover proposals "will be a very ripe target for change in the conference."

Rostenkowski declined to be interviewed about the continuing controversy over his tax proposals. "He's really not interested in saying anything more about it," a spokesman said.