Recently, a delegation of business and economic leaders from Albuquerque visited Phoenix to understand the reasons behind the stronger economy of Phoenix compared to New Mexico. The trip aimed at exchanging ideas but was deemed unnecessary by some, as the differences in economic prosperity between the two regions are evident without travel.
The core reason for Arizona's superior economic performance is attributed to its public policies. For instance, Arizona has a top personal income tax rate of 2.5%, while New Mexico's stands at 5.9%. This lower tax rate allows people to retain more money, attracting more residents to Arizona.
Arizona is also a "right to work" state, unlike New Mexico which requires private sector workers to join unions. Additionally, while Arizona has a high sales tax rate of 8.38%, it does not impose a gross receipts tax on small businesses like New Mexico does.
Another policy difference lies in construction wages; Arizona lacks a state-level prevailing wage law for public projects, resulting in market-rate wages for such works. Moreover, Arizona boasts a higher labor force participation rate than New Mexico and fewer welfare program participants.
Arizona's business-friendly environment is reflected in its Fortune 500 company presence with ten companies listed compared to three in New Mexico. Crime rates are also lower in Arizona compared to New Mexico.
In education, Arizona offers various school choice options and outperforms New Mexico's K-12 system despite spending less per student. This focus on education makes Arizona appealing for businesses and helps keep youth engaged productively.
Higher education spending further highlights differences; Arizona spends significantly less per student than New Mexico yet achieves better outcomes. Despite limited oil and gas resources compared to New Mexico, Arizona's policies drive faster economic growth and population increase.
Paul Gessing, president of the Rio Grande Foundation—a nonpartisan research organization—emphasizes that New Mexican leaders should study these policy advantages held by Arizona and consider adopting them.
