How States Can Compete for Prosperity

Originally published on Substack. 

​Did you know that states do not become prosperous because politicians pick the right companies? They prosper when people have strong incentives to work, invest, build, and stay.

That was the theme of my recent conversation with Paul Gessing of the Rio Grande Foundation on Tipping Point New Mexico⁠ Episode 836⁠.

We discussed eliminating New Mexico’s income tax, welcoming data centers, and putting states on a path toward ending property taxes. New Mexico is a useful case study because it has enormous fiscal capacity but still underperforms its potential.
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Stop Taxing Work

New Mexico’s individual income tax reaches 5.9%⁠, while neighboring Texas has no individual income tax. That difference matters. Taxes on income punish work, saving, entrepreneurship, and investment.

New Mexico’s population fell slightly from 2024 to 2025 and is only 0.4% larger than in 2020⁠. Real GDP also contracted at a 1.0% annualized rate⁠ in the fourth quarter of 2025. Yet the state expects nearly $14 billion in recurring general fund revenue⁠ for FY2027 against just over $11 billion in recurring spending.

That creates an opportunity. Restrain spending and use recurring surpluses to phase the income tax toward zero. Do not replace it with another destructive tax. That is how states diversify: improve the rules for everyone instead of subsidizing whoever has the best lobbyists.

Welcome Data Centers Without Corporate Welfare

The same principle applies to data centers. Project Jupiter in Doña Ana County has generated concerns about water, electricity, taxes, and incentives. Those questions are legitimate. But investment itself is not the problem.

According to Oracle’s project plans⁠, the campus will use closed-loop cooling and an onsite fuel-cell microgrid. The company says cooling and fuel-cell operations will use non-potable water and consume, averaged across 15 years, roughly the annual water use of nine U.S. households.

Those are company estimates and deserve scrutiny, but they illustrate how markets respond to scarcity. When water is valuable, businesses have incentives to conserve it. When grid capacity is tight, entrepreneurs seek other power arrangements.

As I have argued, the answer is energy abundance rather than artificial scarcity⁠. No special subsidies. No sweetheart abatements. Make companies pay identifiable infrastructure costs, protect property rights, then let profit and loss determine whether the investment succeeds.

Secure Real Ownership

Property taxes are the third major issue. As I argued in Secure Ownership by Ending Property Taxes⁠, you can pay off your mortgage and still owe government every year simply to keep your home. That weakens real ownership.

But property tax relief without spending restraint is mostly a shell game. Government spending is the source of the tax burden. The better path is to limit spending growth to no more than population growth plus inflation, use recurring surpluses to compress tax rates, and steadily move toward elimination.

Bottom Line

Income taxes punish earning. Property taxes weaken ownership. Corporate subsidies distort investment. Excessive regulation punishes building. The common mistake is government trying to direct resources instead of letting people do it.

Restrain spending. Cut income taxes. Protect property rights. Stop subsidizing favored businesses. Welcome investment that can stand on its own. That is how New Mexico can compete. And it is how every state can let people prosper.

Watch the full conversation⁠ and read the episode summary⁠.