[PeterisP]

If you're paid $100 in cash as wages and use it to buy food and pay rent, then your effective tax rate is equal to the sales tax rate.

If you or your company is earning $1m in profit, and use half of that for spending and buying goods (that are taxed by sales tax) and the other half to buy revenue-producing assets - shares of other companies, real estate, bonds - then half of your income isn't taxed at all, your effective tax rate is twice as small as the tax rate on poor people.

This introduces an even stronger rich-get-richer mechanic to the society, as accumulating wealth generation (not just wealth) is tax-free.