Don't you wish someone would do this for you?

California Assemblyman Mike Gatto, a Los Angeles Democrat who is backed by labor unions, says he sympathizes with the little guy fighting unfair systems.

"When a whistle-blower comes forward, they are usually doing a very good job for society," Gatto told me.

But that's not how he felt last winter, when Gatto read an online commentary about how Vanguard Group, the Malvern-based private company that runs the nation's largest and fastest-growing mutual fund operation, might owe "billions" in unpaid income taxes. The issue was exposed by ex-Vanguard tax lawyer David Danon's whistle-blower complaints to the IRS and state tax agencies.

Gatto likes Vanguard. He knows union teachers whose retirement package includes Vanguard funds. He worries: Would higher costs boost Vanguard fees? "In this case, I'm not sure this guy is doing some sort of the Lord's work," Gatto concluded.

There ought to be a law

, he thought. So he called some statehouse lawyers to write one.

At first, Gatto wanted a bill to "prevent whistle-blowers from collecting" if they tried to expose potential wrongdoing at Vanguard. The lawyers said that wouldn't work.

So Gatto came up with a one-page bill to exempt Vanguard and any other "mutual fund company owned by investors in the mutual funds that it serves" from owing California state income taxes. Last week, it passed the state Assembly revenue and tax committee by 9-0.

I pointed out to Gatto that his news release trumpeting the tax break's progress contained a few errors, including that Vanguard is a "nonprofit."

"This has not been the most accurate of our press releases," Gatto agreed. He blamed the lack of financial acumen among California's legislative communications staff.

The IRS and Securities and Exchange Commission have been reviewing Danon's claims. Texas paid him $117,000 for "informing" on his ex-employer so the state could collect its due.

But Gatto would rather California not collect Vanguard's tax money. He would prefer the company do business there tax-free. His proposal does not require the company to pass the savings to shareholders.

I asked Gatto if legislators would also support eliminating taxes for the low-cost retailers Amazon.com and Walmart if that might help them sell products cheaper, too.

Those companies aren't owned by their customers, Gatto's spokeswoman, Eric Menjivar, pointed out.

Is Vanguard? Yale Law School associate prof John Morley, in a 2014 Yale Law Journal article, wrote that "Vanguard is not meaningfully different" from other mutual funds, since its fund customers lack control, key information, or effective equity ownership. They are "not truly the 'owners' of the management company any more than the fund investors in any other mutual fund complex."

Gatto says Vanguard didn't ask for the tax break.

"While we are now aware of Assemblyman Gatto's proposal, we were not consulted about the bill," Vanguard spokeswoman Katie H. Hirt told me. "Vanguard pays its fair share of taxes," she added.

Vanguard wouldn't say, and Gatto didn't know, how much the company might save at California's expense with his bill.

Despite Monday's vote, Gatto told me Friday he's thinking about abandoning the tax break - and going back to his earlier program of blocking whistle-blowers from any rewards for reporting illegal conduct at Vanguard.

"The bill's not done yet," Gatto added. "It is really early in the process."

JoeD@phillynews.com

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