The reason why think a large red shift corresponds to large distance is that this is what is predicted by General Relativity.
If you make a few simplifying assumptions about the universe you can solve Einstein's equation for the universe to give a result called the FLRW metric. This predicts the universe is expanding and predicts the red shift increases with distance.
However we have experimental evidence for the red shift-distance relation. For example there is a type of supernova called SN1a for which we can calculate the brightness. Because we know what the brightness should be we can measure the brightness as seen from Earth and use this to calculate how far away the supernova is. Then we can measure the red shift and test the red shift-distance relationship.
The measurement of SN1a red shifts is the way dark energy was detected, because if you do the experiment you find the supernovae are actually slightly farther away than the red-shift predicts they should be.