Are you sure those tires are 12" tall? from ground to top? They look more like 15 or 16" tires to me???
I was going to say that gearing is the issue, but maybe not. With the 7" DriveN Unit Pulley, highest gear is around 3.7 :1.
3600 RPM with 12" tires in "high gear" is only 35mph.
Tires aren't huge (if they are indeed 12" tall, but I don't think they are), kart doesn't seem to weigh a ton, it is an 8HP engine, plus it has a TC. I suppose it depends on if there is one or two passengers. You might be able to get away with that gearing with a single passenger, probably not with two.
I'd probably start off with a TC and engine tune up. Clean the carb and try to get some of those original 8 ponies back. Maybe you are due TC maintenance and a new belt?
I'm guessing it is a combination of the TC needing maintenance, a borderline gear ratio, and the engine coming down with a case of the Teckasheemas.
If it were my kart, I'd be using something like a 54T sprocket instead of the 40T you have. You can also achieve a more desirable gear ratio by using a smaller than 12T sprocket.
40:10 with 7" is 4.5 :1 in high gear.
40: 9 with 7" is 5.0 :1 in high gear.
If the tires are 15 or 16" like I guessed, then I'd have to change my answer. With taller than 12" tires, the gear ratio you have is no longer border line. It is just bad.
With 16" Tires and a 7" driven unit pulley, I'd want a 60-72T rear sprocket if keeping the 12T front sprocket.