The only possible countervailing public-policy argument that I can think of is that the owners of Vanguard funds are more affluent than Americans in general, so by forcing Vanguard to charge higher fees and then taxing the resulting profits, the IRS and the states would be doing their part to fight income inequality.
But Costco’s customers are more affluent than Americans in general, too, and I don’t see anyone arguing that the IRS should force it to charge as much for its products as other stores do. That’s because it would amount to saying that competition on the basis of price shouldn’t be allowed. Which sounds awfully un-American.
I don’t have data for Vanguard specifically, but the Investment Company Institute, the mutual-fund trade group, reported that 67 percent of households in the U.S. with incomes of $50,000 or more per year owned mutual funds in mid-2014, while only 18 percent of those with incomes below $50,000 did. By reducing the gains of Vanguard shareholders, this would reduce the taxes that they pay. But given that much of their money is in tax-sheltered or tax-exempt retirement accounts, I'm willing to believe that forcing Vanguard to charge higher fees would increase overall tax revenue.