State and Local Tax Exemption Programs: Reply

Mr. Lamberton’s comment [5] on our recent study of industrial tax exemption programs [6] is focused on two points: (a) that average costs have been incorrectly compared with marginal benefits and (b) that the costs of tax exemption programs have been overestimated “because the opportunity cost of that part of tax revenues foregone which is attributable to induced investment is zero and should not be included in the costs of tax exemption.”