Canada’s federal and provincial governments should reassess the tax treatment of second-job income for full-time workers, recommends a study published this morning by the Montreal Economic Institute (MEI).“It is simply indecent to ask someone who has to work two jobs to make ends meet to pay taxes of 20% or more on their second salary,” says Jason Dean, associate researcher at the MEI 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.”According to data from Statistics Canada, in 2023 more than 658,000 full-time workers held down a second job. In all, about a million people worked more than one job at the same time. Slightly more than one-third of multiple job holders said they did so to cover basic living expenses.A full-time worker from Ontario earning $35,000 a year from their primary employment is subject to a marginal tax rate of 20.05% of the very first dollars earned from their secondary job.The MEI 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 held in addition to primary full-time employment.Ontarians in this situation would realize an average annual tax savings of $2,722. The authors estimate that the measure would reduce revenues by $981.1 million for Ottawa and $123.4 million for Ontario.“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,” explains Dean. “This relief measure would have a real impact on the lives of those who have the most difficulty making ends meet.”The study said independent contractors can deduct all work-related expenses — from vehicle and home office costs to meals and smartphone bills and even mortgage interest, but the normal person working two jobs cannot."The need to level the playing field is evident," the study said."There is an inherent unfairness to the tax burden borne by those with secondary employment, compared to workers who can obtain overtime pay at their main job or benefit from tax breaks for their extra hours. Roughly 11% of workers have access to paid overtime, while a growing number — 28%, up from 13% in 2022 — are actively providing their services in the expanding gig economy."The study concludes, "Canadians’ economic strain is both painful and real. In their bid to regain financial stability, many are contemplating or have felt compelled to take on side jobs, only to see their perseverance unfairly punished by steep marginal taxes. Real solutions are needed, not quick-fix payouts that do little to alleviate hardship or address employers’ challenges finding workers."A marginal reset of the tax rate on second jobs promises broader and more lasting relief and can play a role in addressing our acute labour shortages." "It also levels the playing field by reducing the tax burden for paid full-time workers with second jobs to bring it in line with the benefits already enjoyed by those eligible for paid overtime and the deductions allowed for the self-employed. This is a tangible, easy-to-implement solution that acknowledges and rewards Canadians for their economic resilience."
