Obama Calls for Wage Increases and Tax Reforms in State of the Union


President Barack Obama proposed a series of actions to deal with economic issues ranging from the minimum wage to tax reform and student loan debt during his State of the Union address on Tuesday evening. As expected, Obama highlighted the need for employers to raise the minimum wage. He called on Congress, as in last year’s speech, to raise the minimum wage.

Recognizing that the prospects for passing such legislation in a divided Congress are unlikely, he said he would use executive action to raise the minimum wage to $10.10 an hour for federal contractors. He also urged business leaders and local lawmakers to follow the lead of a pizza shop owner in the audience who had decided to raise the wages for his employees.

“Tonight, I ask more of America’s business leaders to follow John’s lead: Do what you can to raise your employees’ wages,” said Obama. “It’s good for the economy. It’s good for America. To every mayor, governor, state legislator in America, I say you don’t have to wait for Congress to act—Americans will support you if you take this on. And as a chief executive, I intend to lead by example. Profitable corporations like Costco see higher wages as the smart way to boost productivity and reduce turnover. We should too. In the coming weeks, I will issue an executive order requiring federal contractors to pay their federally funded employees a fair wage of at least $10.10 an hour because if you cook our troops’ meals or wash their dishes, you should not have to live in poverty.”

Obama also issued a series of proposals, including several related to tax reform. As in past speeches, he cited the need to reform the Tax Code to discourage companies from moving jobs  offshore.

“With the economy picking up speed, companies say they intend to hire more people this year,” he said. “And over half of big manufacturers say they’re thinking of insourcing jobs from abroad. So let’s make that decision easier for more companies. Both Democrats and Republicans have argued that our tax code is riddled with wasteful, complicated loopholes that punish businesses investing here and reward companies that keep profits abroad. Let’s flip that equation. Let’s work together to close those loopholes, end those incentives to ship jobs overseas, and lower tax rates for businesses that create jobs right here at home. Moreover, we can take the money we save from this transition to tax reform to create jobs rebuilding our roads, upgrading our ports, unclogging our commutes—because in today’s global economy, first-class jobs gravitate to first-class infrastructure.”

Obama discussed energy policy, including ending tax breaks for large oil companies. “It’s not just oil and natural gas production that’s booming; we’re becoming a global leader in solar, too,” he said. “Every four minutes, another American home or business goes solar, every panel pounded into place by a worker whose job cannot be outsourced. Let’s continue that progress with a smarter tax policy that stops giving $4 billion a year to fossil fuel industries that don’t need it, so we can invest more in fuels of the future that do.”

Obama also proposed expanding the Earned Income Tax Credit, citing recent remarks by Senator Marco Rubio, R-Fla., about reforming the EITC (see Marco Rubio Plans to Offer EITC Replacement).

“There are other steps we can take to help families make ends meet, and few are more effective at reducing inequality and helping families pull themselves up through hard work than the Earned Income Tax Credit,” said Obama. “Right now, it helps about half of all parents at some point. Think about that—it helps about half of all parents in America at some point in their lives. But I agree with Republicans like Senator Rubio that it doesn’t do enough for single workers who don’t have kids. So let’s work together to strengthen the credit, reward work, help more Americans get ahead.”

In addition, Obama proposed a way to give workers more retirement money by offering a new kind of individual retirement account in the form of a savings bond that he called a “MyRA.”

“Let’s do more to help Americans save for retirement,” he said. “Today, most workers don’t have a pension. A Social Security check often isn’t enough on its own. And while the stock market has doubled over the last five years, that doesn’t help folks who don’t have 401(k)s. That’s why, tomorrow, I will direct the Treasury to create a new way for working Americans to start their own retirement savings: MyRA. It’s a new savings bond that encourages folks to build a nest egg. MyRA guarantees a decent return with no risk of losing what you put in. And if this Congress wants to help, work with me to fix an upside-down tax code that gives big tax breaks to help the wealthy save, but does little or nothing for middle-class Americans. Offer every American access to an automatic IRA on the job, so they can save at work just like everyone in this chamber can.”

Obama cited the need to help young people deal with the heavy burden of student loan debt, suggesting that he would expand eligibility for programs that allow them to limit student loan payments to no more than 10 percent of their income.

“We’re offering millions the opportunity to cap their monthly student loan payments to 10 percent of their income, and I want to work with Congress to see how we can help even more Americans who feel trapped by student loan debt,” he said. “And I’m reaching out to some of America’s leading foundations and corporations on a new initiative to help more young men of color facing especially tough odds to stay on track and reach their full potential.”

The President urged Congress to pass legislation to provide women with equal pay for equal work. “Today, women make up about half our workforce, but they still make 77 cents for every dollar a man earns,” he said. “That is wrong, and in 2014, it’s an embarrassment. Women deserve equal pay for equal work. She deserves to have a baby without sacrificing her job. A mother deserves a day off to care for a sick child or a sick parent without running into hardship. And you know what, a father does, too. It is time to do away with workplace policies that belong in a ‘Mad Men’ episode.”

Obama urged Congress to extend the Emergency Unemployment Compensation program that expired last month and said he would meet with CEOs this week to ask them to commit to hiring more of the long-term unemployed at their companies.

“I’m also convinced we can help Americans return to the workforce faster by reforming unemployment insurance so that it’s more effective in today’s economy,” he said. “But first, this Congress needs to restore the unemployment insurance you just let expire for 1.6 million people.”

He pointed to the example of one unemployed American who was in the audience at the Capitol. “Misty DeMars is a mother of two young boys,” said Obama. “She’d been steadily employed since she was a teenager, put herself through college. She’d never collected unemployment benefits, but she’d been paying taxes. In May, she and her husband used their life savings to buy their first home. A week later, budget cuts claimed the job she loved.

“Congress, give these hardworking, responsible Americans that chance,” said Obama. “They need our help right now. But more important, this country needs them in the game. That’s why I’ve been asking CEOs to give more long-term unemployed workers a fair shot at new jobs, a new chance to support their families. And in fact, this week, many will come to the White House to make that commitment real. Tonight, I ask every business leader in America to join us and to do the same because we are stronger when America fields a full team.”

In the official Republican response, Rep. Cathy McMorris Rodgers, R-Wash., who chairs the House Republican Conference, talked about her background and the need to improve the economy. “Our mission—not only as Republicans, but as Americans—is to once again to ensure that we are not bound by where we come from, but empowered by what we can become. That is the gap Republicans are working to close. It’s the gap we all face: between where you are and where you want to be.

The President talks a lot about income inequality, but the real gap we face today is one of opportunity inequality. And with this administration’s policies, that gap has become far too wide. We see this gap growing every single day.”


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