Seller Financing Interest/Principal Taxes

[Desmond Fitch]

On episode #334 of the BP podcast at 55:45, Ben begins explaining the difference between taxes on interest and principal for seller financing. I've listened to the clip over and over and I keep getting stuck on a few parts. I'm mostly confused as to how the tax rate changes from 25% on only the principal to 25% on "everything". Is he saying that lowering the interest rate and increasing the price results in tax savings because you have to pay income taxes on the interest payments, which are virtually nothing? 

It sounds like a very useful tactic for negotiating seller financing and I just want to make sure I'm understanding it correctly.