Of course it will kill the income tax especially in the US where taxes are crazy and illegal. It could make the end of the US government and the beginning of high unemployment which will be bad for everybody. There will be a lot of chaos I think.
The taxes are even higher in Europe than in the U.S. so bitcoin could benefit more to those that live in places where there are even higher taxes than the norm, the problem is the EU has already noticed this and are trying to crack down bitcoin users and their stored coins.