Single Flat Rate Defines Proportional Tax

Steps:

• Note the tax-free allowance of $10,000 exempts initial income from taxation.
• Observe the single 25% rate applies uniformly to all taxable income above the allowance.
• Recall tax types: proportional means constant percentage rate regardless of income level; progressive increases rates; regressive decreases effective rates; direct refers to incidence on payer.
• Classify this as proportional since the rate does not vary by income bracket.

Why B is correct:

• Proportional taxes apply the same percentage rate to all taxable income, as defined in public finance, making the effective rate constant above the threshold.

Why the others are wrong:

• A: Direct taxes are levied on income directly, but this describes payment method, not rate structure.
• C: Progressive taxes increase rates with higher income levels, unlike this flat rate.
• D: Regressive taxes take a higher effective percentage from lower incomes, which this uniform rate avoids.

Final answer: B