00:01
So first of all, let's just make sure we know what a sales tax is.
00:04
If a sales tax at t percent, right, like a 10 percent sales tax, will generate t times c revenue, right? where c is the amount of consumption that you're doing, right? because the sales tax effectively is charged on final goods and services, right? it's not charged on investment goods.
00:23
If you go and buy investment goods that are used to be, to make something else, we don't really think of, those are usually not subject to sales tax.
00:31
It's only usually sort of final consumption goods.
00:35
So the key thing here then is we're thinking about consumption and how consumption varies between rich and poor people.
00:42
And the usual idea is that for poor people, consumption as a fraction of income is high.
00:52
And for rich people, consumption as a fraction of income is low, right? this is just generally how we, you know, this comes from the data.
01:02
If you're poor and you make a small amount of money, you don't save much.
01:05
If you're not saving much, that means you're consuming all of it.
01:08
If you're rich, you make a very large amount of money...