Megan McArdle lays out the grim outlook for the future, pointing out that tax revenues are plummeting, spending is up, and our national credit rating is in danger. Looking at the landscape ahead, especially the challenges that we as a nation face at home and abroad, I conclude that we need bold change instead of incremental policy. This is why I lay out the case for a value-added tax, or VAT, over at Nation-Building blog. In a nutshell,

I’d favor a 15% VAT (half that for housing, none on food), with exports exempt. In addition, the AMT should be repealed and the corporate tax rate cut in half, as well as personal income tax reduced to zero on family incomes below $100,000. Plus, by law 50% of all revenue from the VAT would be required to pay down the deficit for the first ten years.

Who am I kidding? Obama wont dare break his sacred moderate mold – he’s already taken single-payer health care off the table (even though its by far the best bang for our healthcare buck, and preserves the best aspects of the present system including consumer choice). So its no surprise that a VAT is off the table, at least until his second term. But I doubt Congress will play along either even then, thanks to that annoying two-year turnover on the House which guarantees that our elected representatives are always focused on the elected part instead of the representative part.

I lay out my reasoning in more detail over there so take a look if that’s your thing; I can hear the conservative fiscal warriors screaming “Aieeeee” already.

Related: I also wrote about the need for a VAT, and an argument for abolishing corporate taxes, a couple of years ago. Kevin Drum proposed the following deal:

The corporate income tax goes away. It’s replaced by a VAT plus an increase in capital gains and dividend taxes to the same level as the tax on income. (Added bonus: the whole “double taxation” argument goes away since corporate profits aren’t taxed in the first place.) And the whole thing is used to fund national healthcare (along with the payroll taxes and general fund revenues that are already dedicated to healthcare). States could be encouraged to follow suit by agreeing to pick up the Medicaid costs of any state that kills its own corporate income tax.

Big business ought to love it. Their income taxes go away, and with it whole platoons of their accounting departments. No more relocating corporate headquarters to Aruba! Healthcare also goes away, which promises to save them both money and hassle. The replacement tax, a VAT, is easy to administer and is directly passed on to customers, much like a sales tax. Every business would be on a level playing field, regardless of size or industry.

It’s time to start thinking bold. None of this is new, it just takes courage. And maybe some political capital, the kind possessed by an immensely popular President who made Change the centerpiece of his campaign, for example…