@Xenia
I was treating the statement as a discuss statement, not an assertion to take as given. Because implementation of a high tax which hinders productive capacity, impedes growth and restricts tax revenue is rather an unlikely tax policy. But even if we take the statement as given and assume that the tax is high, the first and most potent consequence would be a fall in disposable income and investment, which shifts the AD curve to the left. The only way a higher tax could shift the AS is through a fall in prdouctivity, and/or rising wages or costs of production. In that case, both the AD and the AS will shift to the left, with the new equilibrium at the same price level (if both the AD and AS move to offset/or proportionally) but at a lower level of national income. How can one link this to a just tax system?

@newstudent
Thankyou for your feedback, it is very helpful. I do think that this question is mostly theoretical and I have a feeling that makes it relatively low scoring. What would you suggest regarding such theoretical questions? Like this question is a typical out of textbook debate on merits vs demerits of direct and indirect taxation.