Those millionaires aren't driving up the prices of shacks out in Haiku - or anywhere else 'normal' people live. It's a completely different market. While there is always some crossover, you will find that supply and demand scenarios generally play out within a limited socio/economic strata. In the case of most illegal vacation rentals, these are the exact same properties that would otherwise be available in the long term rental market. The result is fewer units available to residents, and higher prices for the ones that are.
As for your 'little guy just trying to make ends meet' argument, most properties on Maui are zoned for an ohana, a sub 500 sq ft rental unit. However, they are NOT zoned for a hotel business, with it's attendant liabilities and negative impact on the community. So it is possible to generate additional income legally, just not as much and not tax free.
I realize some people took the illegal vacation rental business for granted, and are a bit over extended. I have seen the same thing happen to drug dealers, another illegal business. While I suppose we could feel sorry for them, I personally think they ought to be grateful that they were able to get away with so much profit for so long and move on. Even if some have to sell a few of the multiple properties that many have accumulated through leveraging their ill-gotten gains (oops, there goes that supply/demand thing again), I don't think any of them will be hurting for too long.