The other option is to not offer the tax breaks and if the company wants to build a data center, they also need to pay the taxes for it. If a state is dumb enough to offer tax breaks that's on them.

There's also not "competition" here. It isn't as if data centers have almost any positive local effects, beyond their property tax revenue. They have very few employees and if the property tax is cut they ultimately don't generate any income for the locality.

I can tell you that as someone living in Idaho, I see no differences when I work with the datacenters in Oregon, Washington, or Utah. I'm not benefited in the slightest by the few Idaho datacenters that I interact with currently.

It's the same argument that's been used to give sports stadiums sweetheart deals. These things have almost no local benefits and a lot of negative side effects with their presence.