They’re taking their business elsewhere

A few months ago, we tried to remind folks about “It’s the Economy, Stupid.”

There we reported that we had been getting lots of news about our economy, and none of it was good.

This month, the University of Hawaiiís economics research organization, UHERO, released its third quarter economic outlook on Hawaii. The title of the paper wasn’t exactly comforting: “Already Weak, Hawaii’s Prospects Look Increasingly Dicey.”

“All told,” the report stated, “the outlook is for Hawaii to tread water over the next few years, vulnerable to waves that could well pull us under.”

What has gotten us to this point? One problem is our population, which fell in both 2017 and 2018. This decline isn’t simply due to reassignment of active duty military.

As multiple news sources have been confirming, people have been, and are, leaving our fair shores. “(L)ikely responding to better work opportunities and lower living costs on the US mainland,” the UHERO study says.

Policymakers take note! We, among many others, have long warned that if government squeezes our population too hard with taxes, regulations, and other impediments, people will vote. Not necessarily at the ballot box, but with their feet.

UHERO has looked at the hard numbers, and they see that people are in fact taking their business elsewhere. Are you concerned about population decline? Or about “brain drain”? Then don’t deny the problem any longer.

We need to do something about our cost of living. And by the way, what happens when the cost of government stays the same but the number of people contributing to that cost decreases? More cost per person results, which adds pressure to lawmakers to increase taxes and jack up our cost of living even more.

Can the problem be solved by squeezing our tourism industry further instead of our general population? UHERO observed that the number of visitors in Hawaii on a typical day is flatlining, and visitor spending is trending downward. They are seeing “a sharp pullback in international markets, where the number of visitor days has declined across all major market segments.” More visitors may be arriving, but they are spending less. Translation: Tourists are taking their business elsewhere as well.

Some of that may be due to federal action such as increased tariffs and strength of the dollar relative to other world currencies, but we probably are already at the point where further squeezing of the visitor market gives us economic trouble.

On that front, the recent political spats about transient vacation rentals and the resulting crackdowns in Honolulu, Maui, and other counties have already put a big dent in the supply of places where tourists can be housed. UHERO says that the crackdown on Oahu alone caused a greater than 8% drop in Oahuís overall number of units available for visitor accommodations. Maybe some or many of those places were illegal in the first place, but the economic result is in any event further squeezing that industry sector. Now isn’t the right time to attack it further.

As policymakers begin their annual debate on how to finance government, they should consider that most of our tax laws depend on business activity. When the economic engine we call business makes money, they make money. Are we going to put more brakes on the engine with more taxes, fees, and regulations? Instead, we should be bending over backwards to find ways to help the engine spin faster.


Tom Yamachika is president of the Tax Foundation of Hawaii.

  1. Robert "Tito" Edwards September 29, 2019 7:05 am Reply

    Raising taxes is not the answer. More regulation is not the answer. This is a death spiral that will gain speed if this isn’t stopped. Whoever stays back on Kauai will be the early & only people suffering from more taxes. The majority of my classmates now live either in Honolulu or on the mainland like me & my family. We want to live on Kauai but cannot afford to do so. Relying only on the government will make things much more worse.

    Businesses & the best & brightest minds will come back, but only if the difficult decisions of cutting taces & reducing regulations are combined with smart growth management.

  2. Charlie Chimknee September 29, 2019 8:25 am Reply

    Aloha Kakou,

    A worldwide trend is growing more and more every year. Travelers are turning away from the traditional large and small hotels and preferring to stay in neighborhoods surrounded by local people, allowing visitors the opportunity to immerse themselves in the local culture, food, language, sports events, festivals, shopping, and social environment.

    VACATION RENTALS are the new trend and when people cannot “fit in” on their vacation they choose somewhere where they can.

    Local zoning codes that favor one neighborhood over another for vacation Rentals is discriminatory, giving one neighborhood a financial advantage while depriving the other.

    When locals complain they do want visitors in their neighborhood, the economic loss will be that their own kids pack up and leave Hawaii for better economic conditions and the family unit is broken, Perhaps forever, to rarely see your own children again and even grandchildren never meeting their grandparents.

    “Open the door and let ‘em in”…sung to the tune of the same Beetles song…and let them spend their visitor money in your neighborhood instead of the corporate Monster Hotels where the profit goes to banks in world capital cities instead of your neighborhood stores and local families’ income and needs.

    Go ahead shoot yourselves in the foot, corporate hotels will love you for it, and when your kids leave for the mainland cities they will make more corporations happy with your kids’ relatively cheap labor.

    Besides vacation rentals provide more local jobs at better wages. Vacation rental cleaners on Kauai make double what the Big Box stores pay in wages.

    And that pay to vacation rental cleaners is not taken from the vacation rental owner but is added to the rental bill…you may even clean your own unit and make more income keeping the money in the family. And that family worker won’t have to drive to somewhere else to work saving time and gas for the car, or pack up and go into the mainland Big City Wilderness.

    There are so many positive reasons to allow vacation rentals, and it is doubtful the vacationer next door is gonna knock on your door to borrow a cup of sugar.

    “Open the door, and let ‘em in…!”

    When Kaua’i gives some of itself to the world, the world gives back. When Kaua’i keeps the visitors in the hotels, the hotels keep all the money.

    Vacation Rentals increase the Volume of Aloha on Kaua’i.

  3. manawai September 29, 2019 9:29 am Reply

    Exempting Hawaii from the Jones Act would make a material reduction in our cost of living in our isolated ocean transportation dependent economy. The law no longer has a basis in reality today as it was designed to protect the American ship building industry during WW2. But the U.S. ship building industry has all but disappeared even with this “tax” that hurts most the lower income folks the most in our community. Who doesn’t want cheaper food prices?

    This is something that can happen right away by a stoke of the pen to enable better lives for the people not only of Kauai but all of Hawaii. Do some research on this antiquated and obsolete law and support a Hawaii exemption. Contact your legislators and ask them to do at least this one thing to help us live in our homeland. It is the quickest and easiest way to reduce our cost of living. How can one not agree with this? Ask them who they support more, their constituents who voted them into office or a virtually dead industry with corporations that do absolutely nothing for the people of Hawaii and the rest of the country. We no longer need a merchant marine to carry troops and supplies as we did in WW2. We can to it all with air transportation and do it faster and better. Think about it. I for one would like to eliminate this anti-progressive tax on Hawaii’s people.

    PS – If your are anti-corporate, as many of your are, then you need to support a Hawaii exemption. Put the needs of people of Hawaii over a limited few east-coast corporations.

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