In the weeks leading up to the State of the Union address, President Obama has gradually laid out his vision for America. I am particularly impressed with his proposal to make two years of community college free for students who are willing to work for it. This program would help young adults from lower-income families get a needed start toward a four year college education or vocation training for a career.

Critics have argued it is easy to propose a new program without paying for it. Well, last Saturday, the president said how he will pay for it: raise taxes. What is great about his tax proposal is it is a twofer. First, it would raise needed revenue—$320 billion over 10 years—to pay for the policies that would help low- and middle-income families. Second, it would make the tax code fairer and help reduce the growth in the share of income going to the top 1 percent by increasing taxes on capital income—bringing taxes levied on income gained from wealth closer to income gained from working. The administration estimates that 99 percent of the impact of this proposal would affect the richest 1 percent and more than 80 percent would affect just the richest 0.1 percent.

The main tax proposal is changing how capital gains are taxed. The tax rate on capital gains and dividends is increased to 28 percent—the rate under President Reagan. Currently, the tax rate on capital gains and dividends is 20 percent plus a 3.8 percent surtax. The president’s proposal would increase the tax rate to 24.2 percent plus the 3.8 percent surtax.

In addition, the proposal removes a loophole—the “stepped-up basis” loophole—that allows the wealthiest taxpayers to escape paying tax on inherited assets. We at EPI have been pushing for this change for years. Currently, when assets are transferred, say in a bequest, no taxes are due on appreciated assets. For example, suppose an individual purchases $10 million in stock. That person would have to pay taxes on any realized capital gains when the stock is sold (if the stock was sold for $100 million then the individual would pay taxes on the difference between the purchase price—the basis—and the sales price or $90 million). But if the individual never sells the assets and passes on the $100 million of stock to an heir, no capital gains taxes are due on the $90 million gain. Furthermore, when the individual receiving the assets sells the assets, the basis is stepped-up to $100 million rather than $10 million. The president’s proposals would retain the $10 million basis for the heir (called carry-over basis) and taxes would be paid on any gains when the assets are inherited. In an era with a deeply eroded estate tax, removing this “stepped-up basis” loophole would help us tax large blocks of inherited wealth—essentially adopting some of Thomas Piketty’s ideas for pushing back against rising income and wealth inequality.

On Tuesday, President Obama will deliver his State of the Union address, which gives him an opportunity to lay out his priorities and set an agenda for the year ahead.

At EPI, we have argued that raising wages is the central economic challenge. It is terrific news that the president will address wage stagnation in his speech. After a year of strong job creation but continued stagnant wage growth, many economists and commentators—not to mention the American people—are beginning to focus on wages. Even the new GOP-controlled Congress is paying lip service to the middle class squeeze (but is offering no program to address these challenges). So we are now entering into a great debate about what can be done to raise wages. Ross Eisenbrey and I offered our solutions in a recent interview in The New Republic.

Given congressional obstruction, the president has done his best to address our most pressing economic challenges through executive action:

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Yesterday, President Obama proposed a fundamental right to earned paid sick leave for all workers in this country. He also directed federal agencies to offer paid family leave to their workers. This is welcome news.

The fact is, we are behind all of our economic peers in the world in terms of providing what should be a bare minimum standard: paid leave when workers are sick, have doctor’s appointments, or need to care for family members. We also fall short when it comes to family leave—although California has had great success with their paid family leave initiative. Meanwhile, Bloomberg put out a great graphic comparing maternity leave in the United States with other countries in the world. It’s easy to see how far we have to go.

Employers, workers, and the public would all benefit from paid sick and family leave. My colleagues and I have shown through a series of studies on cities and states that paid sick leave is of negligible cost to employers, and we have presented this evidence at state legislative hearings. Mandatory paid sick time would mean that the many employers that already provide paid sick days would have a level playing field with their competitors, and all employers would be able to more easily maintain healthy workplaces. While any new labor standard generates concerns about the business climate and job creation, the evidence from jurisdictions that require paid sick days has all been positive.

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The Bureau of Labor Statistics released the Consumer Price Index for December 2014 today, which lets us look at trends in real (inflation-adjusted) wages over the year. In the aftermath of the Great Recession, the U.S. economy has seen very little real wage growth. Real hourly wage growth fell 1.0 percent in 2011, and then 0.1 percent in 2012. Over the last two years, real wage growth has been positive, but slow: real wages rose 0.5 percent in 2013 and 0.4 percent in 2014. Even with the drop in inflation over the last couple of months, average wages increased in 2014 slightly less than in 2013. This means that, by definition, there has been no acceleration in wage growth. Decent wage growth would look like inflation plus productivity growth (around 1.5 to 2.0 percent). Given this, it is clear that the Federal Reserve should not take action to slow the economy down.

Our nominal wage tracker shows just how much wage growth has been falling short of reasonable targets. The labor market and the economy could withstand even higher wage growth because labor’s share of corporate sector income yet to rise in this recovery, and profits are still at record highs. Therefore, real wage growth can be accomplished without putting pressure on prices.

Turning to monthly wages, the figure below shows real average hourly earnings of all private employees (top line) and production/nonsupervisory workers (bottom line) since the recession began in December 2007. For both series, you can see that real wages fell during the recession, then jumped up in late 2008, in direct response to a drop in inflation. When inflation falls and nominal wages hold steady, the mathematical result is a rise in inflation-adjusted wages. After the deflation leading up to 2009 stopped boosting real wages, wage growth has been flat.

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The White House finally weighed in on the new House rule preventing a simple fix to extend the life of Social Security’s Disability Insurance (DI) trust fund. The fund is projected to run out next year, and if revenue isn’t reallocated from the larger Old Age and Survivors Insurance (OASI) program, disability benefits, already meager, will be reduced by a fifth, as taxes allocated to the program aren’t enough to cover promised benefits. Though a routine reapportionment of payroll taxes would address the problem, the new rule prohibits such a move unless steps are taken to extend the solvency of the Social Security system as a whole.

Since a simple majority is required to overturn the rule or vote for benefit cuts, the rule appears largely symbolic. But depending on whom you talk to, it may or may not have real political repercussions. One thing seems clear: It’s an attempt to pit retirees against disabled beneficiaries, with Republicans positioning themselves as advocates of seniors and reformers of a disability system supposedly rife with fraud and abuse.

What happens when this comes to a head in an election year? Though Republicans may be hoping to force benefit cuts by creating an artificial crisis, it seems unlikely that they’ll let 11 million disabled beneficiaries and their dependents, who disproportionately live in red states, experience sharp benefit cuts, which would cause the average benefit to drop below the federal poverty line.

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Rep. Lloyd Doggett and Sen. Sheldon Whitehouse introduced the Stop Tax Haven Abuse Act earlier this week (Rep. Doggett and former-Sen. Carl Levin introduced a similar bill in the 113^th Congress). The bill would strengthen reporting standards for multinational corporations, strengthen various enforcement provisions, and end certain loopholes that allow corporations to avoid paying U.S. taxes as well as “check-the-box rules.” An explanation of these rules can be found here. It would also deal with what’s known as the “Ugland House” problem.

Though most people are aware of the nice beaches in the Cayman Islands, they are probably unaware of the Ugland House. The Cayman Islands is a tax haven for many profitable U.S. multinational corporations, who claim to earn substantial profits there but pay no taxes to Cayman authorities. In 2008, foreign subsidiaries of U.S. multinational corporations reported they earned $43 billion in the Cayman Islands, which is rather interesting, because this amount is 20 times the Cayman Islands’ GDP. It is simply not possible that this amount could reflect legitimate business activities in the Caymans. This is where the Ugland House comes in.

The Ugland House (on South Church Street in George Town on Grand Cayman) is home to the law firm of Maples and Calder. It is also the legal “home” to over 18,000 corporations, many of which are foreign subsidiaries of U.S. corporations. The Ugland House serves as nothing more than a mailing address for these corporations—their only contact with the Cayman Islands. Their actual business operations are located in other countries, like the United States. A lot of money, however, is credited to this address. (It is worth noting there is a building in another well-known tax haven that serves the same purpose: 1209 North Orange Street in Wilmington, Delaware.)

So far, Congress has been uninterested in doing anything about this tax avoidance problem. The Stop Tax Haven Abuse Act would address this problem by categorizing corporations worth more than $50 million which are managed and controlled in the United States as U.S. taxpayers, no matter where they are incorporated. It is estimated that this act would raise almost $300 billion in revenue over 10 years. While some members appear to think that making U.S. taxpayers pay what they owe amounts to a tax hike, Rep. Doggett and Sen. Whitehouse are to be congratulated on their efforts to curb the flagrant abuse of tax loopholes by profitable companies that can afford to pay their fair share.