It’s not a mystery why people are leaving Hawaii

Over the past four years, Hawaii’s population has declined by more than 22,000 people, equaling the the third-fastest population decline per capita in the entire nation. 

Why are people leaving Hawaii?

Keli’i Akina, president of the Grassroot Institute of Hawaii, discussed some of the reasons on Sunday, July 11, 2021, with radio host Johnny Miro of the H. Hawaii Media network of Oahu radio stations: KORL Oldies 101.1 FM, K-Rock 101.5 FM, Retro 97.1 FM, Nash Icon 107.5 FM and Shaka 96.7 FM.

It’s the same story being told over and over again,” said Akina. ‘A recent poll showed that the biggest reason people leave is the high cost of living. The second reason, which is somewhat related to it, is better career opportunities and the ability to make it on the mainland.”

Hear the rest of the 20-minute conversation below. A full transcript is provided.

7-11-21 Keli‘i Akina interviewed by Johnny Miro of H. Hawaii Media radio network.

Good Sunday morning, I’m Johnny Miro. Once again, it’s time for our Sunday morning public-access programming on our H. Hawaii Media family radio stations here on the island of Oahu, also available streaming on your smart device @hawaiistream.fm. Glad to have on hand for discussion on a very relevant topic would be Keli’i Akina, Ph.D., president [and] CEO of Grassroot Institute of Hawaii. Good morning to you, Keli’i. It’s a great Sunday as usual here.

Keli’i Akina: Well, Sundays are always great in Hawaii. Good morning to you and all the listeners. Great to be with you today.

Miro: We’ve got a lot of folks that might possibly have a big decision to make: Do they stay or do they leave? Thousands flock here from around the world to visit here. We’re fortunate enough to be living here. It’s not that easy for a lot of folks, but they have to make a tough decision. Family, friends are here. It’s just tough to get by. That’s what we’re talking about: the migration [of] folks leaving Hawaii possibly because of taxes, what have you. 

Keli’i, the first question would be: We’re used to saying goodbye to family, unfortunately, and friends who go to the mainland, that tough decision you have to make. But it appears [to be] becoming more of a trend recently. What’s going on here?

Akina: Well, it’s the aloha spirit, and as you know, aloha is a multi-meaning word. It can mean “welcome” and “hello.” And that’s one of the most beautiful uses of the word. It can also mean “I love you,” but increasingly, it is now meaning “goodbye” and “farewell.” Especially between people who have lived here with each other for a long time. Right now, people are leaving our state in droves. In the past four years, Johnny, Hawaii lost more than 22,000 people. That’s a net figure, and that has boosted us into the third-fastest population decline in the entire nation. Can you believe that?

Miro: No, that’s hard to believe. Now, do we know why folks are leaving Hawaii? It seems pretty obvious, but do we actually know why they’re leaving?

Akina: Oh, absolutely. It’s the same story being told over and over again. A recent poll showed that the biggest reason people leave is the high cost of living. The second reason, which is somewhat related to it, is better career opportunities and the ability to make money on the mainland. We’ve got an entire collection of story after story about this at the grassrootinstitute.org website, “Why people are leaving Hawaii.” 

Now, some of the cost of living is inescapable due to our unique geography out here in the middle of the Pacific. But some of the high costs of living, like the high taxes needed to support a big government and all its spending, the high cost of housing due to regulations, those are things we could do something about. But unfortunately, our bad political policies force us to deal with an extremely high cost of living.

Miro: Some states seem to be doing much better, less restrictions, and economically they’re doing much better. People seem to be making those decisions to flock to those states. It seems we’re not the only state that is experiencing this pattern of people leaving. Was this part of a larger national trend?

Akina: Well, we can look at all the statistics and all the surveys we want, but bottom line, people vote with their feet. Right now, people are leaving states with higher tax rates to go to states with lower tax rates. That’s an obvious trend. There are many experts, like some of our Grassroots scholars, such as Daniel Mitchell of the Center for Freedom and Prosperity, who have been looking at this issue and tracking the larger trends. What they see is that state-level economic migration over the past many years is caused in high measures by high taxes. People move from states that have higher taxes to [states with] lower taxes.

In one sense, there’s always been migration to certain attractive places like Florida and California. Think of retirees. But migration for economic reasons has been an accelerating reason in the past few years. 

Let me give you an example: California has a 13.3% top income rate, and it’s losing people to Nevada, which has no taxes whatsoever in terms of income tax. New York and New Jersey and Connecticut, they’re losing people to Florida. The trend is interesting, Johnny, because the migration patterns used to be more climate-oriented, with people moving to warm, sunny places, especially as they get older. California used to be the place where people wanted to go for that exact reason. Now, California is famously losing people and businesses to other states like Texas and Florida that have better tax situations. It’s a pretty obvious thing when we just watch where people are going.

Miro: Yes, that is the case. They used to only do that also for the winter months, going down to the South, but now it’s permanent. What are these states that are losing the population, if you haven’t covered already, what do they have in common, do you think?

Akina: That’s a good question, Johnny, because we try to take a look at overall trends and see if Hawaii is part of that. The simple answer as to what they have in common is tax policy, but there’s really more to it than that. 

First, though, we’re seeing places with higher taxes, as I mentioned, like California and Hawaii, lose population to those with lower taxes. These same states also tend to have overburdensome regulation, and that hurts businesses and adds to the high cost of living. It especially hurts the majority of businesses, which are small businesses and businesses which cannot carry the huge weight of tax and regulation burden.

Take housing, for example, that’s another reason. Hawaii has among the highest housing costs in the nation, everybody knows that, and that’s a major factor in why people leave the state, whether they’re trying to buy a home or whether they have to rent and can’t buy. They’re leaving because the cost of housing is so high. But in Hawaii, that problem of housing cost is perpetuated by land use and zoning and housing policies that prevent the housing supply from keeping up with demand. It’s a wrench that the government throws into the system.

If you look at California, the situation is similar, and they’re definitely losing population. California has very restrictive building rules that have made existing housing stock very expensive unless you’re living in one of the more far-flung or isolated parts of the state. In short, this is what we’re seeing: People are voting with their feet by leaving places that have become expensive or difficult to live in, and they are going to places that are more attractive in terms of cost and opportunity.

Miro: With us this Sunday morning is Keli’i Akina, Ph.D., president, CEO of Grassroot Institute of Hawaii. That’s Grassroot Institute of Hawaii, and it’s grassrootinstitute.org for information on this topic and other topics, of course. 

The states that are benefiting from this migration, what are they doing to attract these new people and the businesses. Is there anything that we can learn, the state of Hawaii can learn from them?

Akina: That’s a great question, and that’s the kind of question we ask at the Grassroot Institute because we’re constantly looking for best practices, what’s being done elsewhere. As everyone knows, losing our valuable resource of locals, who’ve lived here for a long time and who’ve had generations of family here as well, is not necessarily the best thing for the state.

Now, the states with no income tax tend to attract new people, but zero-income-tax states aren’t the only beneficiaries of this positive migration. It’s really a question of which states have created a climate that is friendlier to investment and opportunity; in other words, a place where businesses can thrive, where people can start businesses, grow businesses and succeed in businesses.

We’ve heard a lot on the news about businesses and individuals leaving California and moving to Oregon or to Texas, which have lower taxes and regulations. South Carolina, Idaho and Montana have also been attracting people from states with higher taxes and regulations. In other words, Johnny, these states have smaller government, less regulation, less spending, and therefore, lower taxes. That makes them extremely attractive to investors and to entrepreneurs.

It becomes a bit of a no-brainer for a small business owner or an entrepreneur in one of the top income-tax states in the country like New York, California, Massachusetts or Hawaii to go somewhere else like Nevada, which has no income tax. I know many friends who have moved their residency and their businesses to Nevada in the last several months simply because of the acceleration of the impact on small businesses with COVID, we were in a bad state in terms of government regulation before the pandemic, and now it’s just as bad if not worse. It’s a difference that these people who are moving can see in their bottom line, and so it’s ultimately a financial decision that they’re making.

Miro: People, Keli’i, might come back and say, “Is this just really about the rich people trying to save a little money on their taxes?”

Akina: Well, that’s interesting. A lot of times you hear this, but we have to take a critical look at what’s being said here. That’s not necessarily the case, that this is about rich people leaving because of taxes. The migration pattern exists for people who are middle class or lower-middle class as well, because whether they’re hit with the highest level of taxes or not themselves, they’re impacted by businesses and business owners having to deal with taxes who ultimately pass that burden on in the cost of goods.

The tax bill may not be something that motivates everybody to move, but opportunity is a big motivator. People go to where the jobs are, and where jobs tend to be in places that have more business-friendly climate. People go to where jobs are offering more benefits, more opportunities, higher salaries, and where you can at the same time acquire a home at a lower rate, a lower cost. These business-friendly states attract more investment in entrepreneurs, and that stimulates the economy, and that creates more jobs, which attracts more people at all income levels.

What we need to be wary about is this: Anyone who makes a call to “tax the rich,” because that can drive people like doctors away, or business owners away, or those types of jobs. These policies don’t just drive off the very wealthy, they drive away your local pediatrician too. Frequently, the wealthy may not need to leave. Taxing the rich won’t necessarily send them away because they could still afford their second or third home in Hawaii.

But what it does is make them send their capital, their money, away to incorporate in another state or somewhere else, where their money will not be as taxed or where their business will not be as regulated. Overall, attempts to “steal from the rich and give to the poor,” a Robin Hood mentality, actually backfires. They actually hurt the poor in the long run by reducing the opportunities that we have here. They also reduce the tax base, making the people who stay in Hawaii have to pay more. This is a problem overall that affects everyone. We’re all in the same boat.

Miro: Keli’i Akina, from Grassroot Institute of Hawaii, joining us on this Sunday morning, on the H.Hawaii Media family radio stations public access programming. 

Now, being an island state, we have finite landmass. You heard about everybody — well, for the most part, the neighbor islands — talking about the influx of visitors here. Is it really a problem if Hawaii loses a little population? Doesn’t that help us with overcrowding or the availability of housing?

Akina: Well, except that there is a way to have more housing without losing population, and that’s through better policies that affect housing. You see, when people leave, that creates more problems, like the doctor shortage or disappearing jobs, or the brain drain and the shrinking economy. 

Loss of population also leads to shrinking the tax base, where there are fewer taxpayers left to fund the state budget. This can also lead to a downward spiral where the government raises taxes to get more money from the taxpayers who are left, as it drives more taxpayers away, which requires another tax hike, and so on.

Reducing the overall population doesn’t necessarily help us. As we have reported on elsewhere, and I’ve talked about in other shows we’ve had with you, there are solutions that are at hand, to being able to use a great deal of the land that’s not being developed, that’s not being used for agriculture, that’s not necessary for watershed preserve, to use much of that land, that’s available to increase the supply of housing. 

If government regulations got out of the way, we could increase the supply of housing and bring down its costs. This idea that we are all better off if we simply have more people move away is really a myth.

Miro: I guess the question is, how did we end up with these policies in the first place that basically drive away taxpayers and businesses? It’s not as though they’re doing it on purpose, the politicians?

Akina: Well, yes, I agree with you, Johnny. I don’t think that our government leaders, our legislators, and our county council members go to work in the morning, saying, “I want to find a way to make life harder for people in Hawaii.” I think that a lot of the consequences of their policies are unintended. There are a lot of very good intentions, but we have to look at the basic economics to really work through whether a policy is good for us or is bad for us. That’s why we have to look at what other states are doing and see what works and what doesn’t work.

We’re not claiming that politicians intentionally choose to drive people away. If anything, their good intentions would want to keep people here, but the kind of approach that is taken doesn’t really work. Various government programs are very expensive and attempt to appease all different constituencies, which ends up slowly pushing up spending and taxes. This is part of the shrinking tax base problem. The people who stay tend to be the ones who are receiving benefits from the government budget.

Now the ones who leave are the ones who are footing most of the bill. The result is fewer taxpayers are left to shoulder the burden of the state budget, but the pressure to keep funding those government programs continues.

Miro: I see. All right. How does the population loss affect our state finances?

Akina: Well, if people are leaving and the tax base is shrinking, but spending continues at the same rate or higher, eventually you’re going to end up with a fiscal crisis. This is precisely what happened in the country of Greece. After a while, you just don’t have enough taxpayers left to pay the bills for all the commitments that politicians make. In Hawaii, it’s likely that we’ll end up deeper and deeper in debt as a state, as our policymakers have signified their willingness to borrow in order to keep spending at the same rate. Now, of course, borrowing just means even higher bills for future taxpayers. This takes an additional toll on the economy. Business owners and investors start to see your state as a losing proposition.

Miro: A couple more questions for Keli’i Akina from Grassroot Institute of Hawaii: Can we overcome this problem, the problem of the population, and the capital loss by having the government invest directly in the economy through some strategic spending projects, maybe?

Akina: Well, you’re talking about something that makes politicians salivate oftentimes. The ability to say we’re going to solve this problem by having this major infrastructure building … of … housing projects and so forth, more roads, is something that seems to promise jobs and opportunities to people and looks very attractive during election season. But this is called the “government multiplier effect,” and it’s used by some to rationalize high levels of government spending.

Just remember this: When you multiply the size of government spending, you also multiply your tax bill. Spending is more likely to make things worse, since it puts more pressure on taxpayers. That leads to more people leaving and more pressure to raise taxes so that the budget can continue to support the high rate of government spending. If anything, you’re just accelerating the problem, and anyone can take any number of public projects that have been initiated in the last several years, such as the rail, for example, the stadium, for example, and see that the government is not the most efficient operator of businesses. 

Not only on projects such as the rail do we end up having skyrocketing costs. We also, as a government, are spending at a rate faster than the private sector economy is growing, and that’s a very bad sign. Our private economy should be growing faster than government spending, but it’s not. In Hawaii, the government is a real drag on the overall economic well-being of our state.

Miro: Well, the big question is, if Hawaii leaders wanted to stop this population drain and attract more investment, what policies should they pursue then?

Akina: Well, first, let’s deal with the problem of excessive government spending at a spending rate that is faster than private-sector growth. Number one: Reduce government spending. It’s that simple. This can start with a second suggestion, which is to have a meaningful spending cap. We have a constitutional limit as to how much we can spend, but unfortunately, the state Legislature can override it and does so frequently. It has no enforcement mechanism, and it can easily be waived, especially at times of immediate crisis. This is like having a speed limit on the road with no police officers.

In addition, we need to keep government spending from outpacing the private sector. That starts with a spending cap that has teeth. We follow the example of Colorado, which requires a public vote to bypass the spending gap. Between 1994 and 2012, that saved Colorado taxpayers almost $6,200 per person. In order to deal with the problem of population loss, we’ve got to do something about reducing spending and taxation, and turn Hawaii into a state that attracts businesses and investments.

On a surface level, people have realized things cost too much here in Hawaii. We have greater opportunities on the mainland. But when we take a deeper look, I hope that as we’ve shared today, people see that a lot of that has to do with the tax policies that our state sets, because that determines whether people stay or whether they go. In the end, Johnny, people vote with their feet. Let’s make Hawaii a place where they want to stay and keep their feet planted.

Miro: You would hope so. We covered a lot. You covered a lot. The great information, once again, coming from Keli’i Akina, the president and CEO of Grassroot Institute of Hawaii. Any other information you’d like to impart to our listeners this morning?

Akina: Absolutely. You can get some great research studies on everything I shared today, or even a free weekly newsletter, by going to the Grassroot Institute website and signing up. Just go to grassrootinstitute.org. Not “grassroots,” but “grassroot,” grassrootinstitute.org. We’d love to send you this information free of charge on a weekly basis.

Miro: All right. I look forward to another topic of interest down the line. I’m sure that’ll be soon. Keli’i, have a fantastic Sunday, and mahalo for spending some time with us once again this morning here at H. Hawaii Media.

Akina: Mahalo to you, Johnny, and a happy Sunday to you and all the listeners. Aloha.


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