|
Financial Services
The Challenge
When the California Board of Equalization proposed changing the tax treatment of mutual funds, four California-based mutual funds retained Forward Observer to develop objective justifications for the regulatory change. The regulation amended how “sales” were to be apportioned under unitary taxation, and its net effect would be to decrease taxes on mutual fund firms with headquarters in California, while increasing taxes on firms based elsewhere. But opponents of the proposed regulation – primarily mutual funds headquartered outside of California – submitted an independent economic analysis to the Board projecting state revenues would be lowered by $370 million.
The Solution
Forward Observer reviewed the proposed regulation as well as the study undertaken by the out-of-state mutual fund firms. Based on this review, we developed our own objective and credible analysis of the proposed regulation. We showed that the new regulation would not reduce revenues, but instead would generate $12 million in added revenues to the state. This finding was fully consistent with Board staff estimates.
Additionally, Forward Observer supplemented the quantitative analysis with persuasive policy arguments. For example, we noted in our written report that the regulation was good tax policy since it exported the tax burden outside of California and stopped penalizing companies that located their headquarters, and associated jobs, within the state.
The Result
Forward Observer’s analysis was submitted to the Board of Equalization, and our representatives attended the public hearing in order to defend our findings if necessary. No member of the Board disputed our findings, and the Board voted unanimously to enact the regulation in April 2007.
Services Provided
• Economic Analysis
> Back to Case Studies
|
