A government introduces a tax reform where the first £15,000 £15,000\,£15,000 of an individual's annual income is tax-free, and any income earned above this threshold is taxed at a flat rate of 30%.
Which of the following correctly classifies this tax system over the entire range of incomes?
Proportional, because a single flat rate of 30%30\%30% is applied to all income above the tax-free allowance.
Progressive, because the average rate of tax paid increases as income rises.
Regressive, because a flat marginal rate of 30%30\%30% represents a larger relative utility loss for lower-income households.
Proportional, because the marginal rate of tax remains constant at 30%30\%30% across all levels of taxable income.