Ottawa and provinces should restart their calculations at zero when taxing second jobs, recommends the MEI

• The revenue losses arising from this measure would amount to $981.1 million for Ottawa.

Montreal, January 11, 2024 – 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.

“It is simply indecent to ask someone who has to work two jobs to make ends meet to pay taxes of 20 percent 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 there will have been just over 658,000 full-time workers holding down a second job.

For instance, 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% as 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 MEI study is available here.

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The MEI is an independent public policy think tank with offices in Montreal and Calgary. Through its publications, media appearances, and advisory services to policymakers, the MEI stimulates public policy debate and reforms based on sound economics and entrepreneurship.

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