A recent study from the Montreal Economic Institute is questioning whether or not it’s fair to tax Canadians more because they are forced to work two jobs just to make ends meet.
The MEI is a non-profit research think tank that offers independent advice on public policy, aiming to create debate around reforms on established principles of market economics.
In a study published earlier this month, the institute addressed the issue of Canadians’ spending power being reduced by 16% since 2020, due to high inflation and weak wage gains.
In addition to lower spending power, the high cost of rent and mortgages has skyrocketed in recent years, due to the Bank of Canada’s interest rates, which are currently at a 22-year high.
Despite the multitude of issues presently facing the average Canadian, the system is still structured so that the more income a person earns, the higher his or her tax rate will be.
“It is simply indecent to ask someone who has to work two jobs to make ends meet to pay taxes of 20 per cent or more on their second salary,” said Jason Dean, associate researcher at the institute and co-author of the study. “By restarting the tax meter at zero for a second job, the taxman would help provide some breathing room for workers who are less well-off.”
University student Jessica Brown, 23, was shocked last year when she received her tax return after working 60 hours per week at two jobs when not attending school.
Brown, who lives in Whitney Pier, Cape Breton Island, worked at a homeless shelter and for a catering company.
“I didn’t realize I’d be taxed more, the more I worked, so it was a bit of a learning curve,” Brown told Saltwire in an interview. “I remember calling my parents and saying, ‘I never thought this would happen when I got a second job.’ I was expecting the opposite. I was working so much, I thought I’d get much further ahead, but I guess I was naïve.”
Brown is just one of many Canadians who are struggling to keep their head above water as Canada’s cost of living crisis drags on
According to data from Statistics Canada, in 2023 a little over 658,000 full-time employees were working two jobs at once and that number continues to rise.
“These are people at the low end of the income ladder,” said Renaud Brossard, another co-author of the study. “Take a New Brunswicker who earns $35,000 a year in their regular job. The moment they start their second job, they’ll be taxed at 24 per cent on that extra income.”
The MEI study distinguished between those who work a lot of overtime or contract work and those who are regularly employed at two separate jobs. This is because people who work overtime often earn time and a half or double pay and contract workers are often eligible for tax deductions as long as they are self-employed.
But that isn’t the case for Canadians who are moonlighting.
The study “recommends that for low-and middle-income Canadians both the federal and provincial governments restart their tax calculations at zero for any second job.”
This would lead to most workers saving a few thousand dollars with their annual tax return.
“For a fraction of our governments’ coming subsidies to battery factories, they could help hundreds of thousands of our fellow citizens who are earning low incomes,” Dean said. “This relief measure would have a real impact on the lives of those who have the most difficulty making ends meet,” said Dean.
Dean noted that if Ottawa was to give people with a secondary income a tax break, it would lose around $981 million a year which may seem like a lot, but when one considers that the federal government took in nearly $500 billion in revenues in 2023, that figure doesn’t seem so high after all.