Taxes on people working two jobs 'indecent:' researcher

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Jessica Brown was shocked when she saw her tax return last year.

The St. Thomas University student had been working two jobs. When she wasn’t at school, she’d put in 60 hours a week, sometimes more.

The native of Whitney Pier on Cape Breton Island couldn’t believe how much her extra income was taxed.

“I didn’t realize I’d be taxed more, the more I worked, so it was a bit of a learning curve,” said Brown, 23, who’d been working at Fredericton Homeless Shelters full-time and part-time as a caterer and bartender at banquets. “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.”

She’s one of many Canadians struggling to keep up in the middle of a cost-of-living crisis that has seen the cost of rent and necessities such as groceries soar.

In a new study, the Montreal Economic Institute questions whether it’s fair to tax people more when they work two jobs to try to make ends meet.

By restarting the tax meter at zero for a second job, the taxman would help provide some breathing room.

Jason Dean

The non-profit research organization points out that the spending power of Canadians has been reduced by 16 per cent since 2020, due to high inflation and weak wage gains. On top of that, the cost of rent and mortgages have gone markedly up, thanks in part to interest rates that are at a 22-year high.

But the more income a person earns, the higher his or her tax rate.

“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,” says 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.”

According to data from Statistics Canada, in 2023 just over 658,000 full-time workers were holding down a second job.

These are people at the low end of the income ladder.

Renaud Brossard

And their numbers have increased. In 2020, just over three per cent of Canadian full-time workers had a second job. That figure reached four per cent by the end of 2023.

“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 institute distinguishes between people who do a lot of overtime or contract work and people with two jobs. People who do overtime, it says, often earn time and half or double pay. Contract workers are often self-employed and eligible for tax deductions.

Not so for people 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.

Most workers would realize average annual tax savings of a few thousand dollars.

“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.”

The researcher said if Ottawa gave people with a secondary income a tax break, it would lose $981 million a year. A sizable amount, for certain, but peanuts compared to what the federal government raked in for 2023: almost $500 billion in revenues. He did not have a comparable figure for how much New Brunswick would lose from the income tax break, but said it would be proportionally similar to Ottawa’s losses.

Brunswick News asked for an interview with Ernie Steeves, New Brunswick’s finance minister, but a spokesperson declined the request. He is preparing the Progressive Conservative government’s annual budget for March 19.

“Differential tax treatment of a second job has not been considered,” wrote Morgan Bell in an email.