An increase in taxes rate by the government will directly affect the demand and income.

The demand effect is that a higher price means, the taxation and subsidies affect the marginal
supply and demand curves. When the rise in the marginal price of the product; the demand of the
product will automatically go down.

The income effect is that a higher price means, in effect, the buying power of income has been
reduced (even though actual income has not changed), which leads to buying less of the good
(when the good is normal).

So, when the imports (expenses) are higher than our exports (income) a big deficit is created.
The government has fewer budgets to spend on the energy projects and because of the less
investment budget; the government generates more taxes. Thus, this will directly affect the
business and standard of living became costly. When the marginal price of a commodity became
high, the purchasing power of the consumer goes down.