Senate Majority Leader Mitch McConnell’s new top economic policy aide has a complicated checklist: oversee implementation of the new tax law and mitigate the damage of impending trade disputes.

For Jay Khosla, that means the dog days of summer are being spent juggling a series of must-do-now projects. The clock is ticking as companies demand clarity about how much they’ll owe in taxes next year, and the U.S. trade war with China and other countries continues to escalate — potentially erasing some of last year’s corporate tax cut gains.

It’s Khosla’s job to listen to Corporate America’s complaints and then nudge the Treasury Department or Commerce Department and members of the Senate to act, depending on the issue. Requests can range from the seemingly absurd — such as an insistence that a company needs a negative tax rate in order to be competitive — to the super technical.

Jay Khosla, staff director of the Senate Finance Committee
Jay Khosla, staff director of the Senate Finance Committee Andrew Harrer/Bloomberg

The Treasury Department has been releasing a slew of regulations that would implement complicated parts of the tax law, and more proposed rules are expected later this year. Khosla, one of the few top congressional tax advisers to stay within government following the law’s passage, holds the power to decide which grievances are legitimate. Then he leans on federal agencies to address the issue in regulations, or in some cases, helps craft a legislative fix to the problem.

“If you’re coming in and telling us the sky is falling down, everything is terrible and this tax bill is killing you, we’ll have that conversation because that’s our job,” the 39-year-old Khosla said in an interview. “We are also at the same time living in the real world and listening to the same earnings calls you are doing publicly and looking at the same publicly reported figures.”

Capitol Hill ‘Meritocracy’

Khosla was previously the staff director for Republicans on the tax-writing Senate Finance Committee. Many of his colleagues have left for the private sector to cash in on their expertise. The former staffer to then-presidential candidate John McCain said he values the longevity he’s seen in his bosses.

He went from working for the longest-tenured GOP member in the Senate — Finance Chairman Orrin Hatch — to McConnell, who became the longest-serving Republican Senate leader earlier this year.

“I want to see the hard work of last year implemented,” Khosla said. “Capitol Hill is a meritocracy. I didn’t have the right last name. I didn’t go to the right schools, but I’ve worked as hard as I could and I’ve had a lot of opportunities here.”

Khosla’s colleagues say his institutional knowledge means he’s one of the few senior aides left who understand the technical nuances of tax and trade as well as the politics of shepherding something through a legislative body that’s designed to move at a plodding pace.

“He’s ideally suited to quarterback these issues for McConnell,” said Brendan Dunn, a former aide to McConnell, who moved to Akin Gump Strauss Hauer & Feld earlier this year.

Bank Dilemma

A one-year lobbying ban for most Senate staff who leave to go to the private sector also means many of Khosla’s former colleagues — the ones with whom he spent 16-hour work days fueled by peanut M&Ms and seltzer water in the run-up to the tax law — can’t talk shop with him.

Khosla’s now at the forefront of handling some of the fallout of how the new tax law — which makes sweeping changes to how companies operating overseas are taxed — is interacting with the existing maze of regulations already on the books.

One dilemma that’s been taking up a lot of his time involves how a tax law provision penalizes some banks that are adhering to a Dodd-Frank Act regulation. The regulation requires foreign banks, including BNP Paribas SA and Barclays Plc, to fund their U.S. branches with debt. The U.S. units then pay that back, with interest. The new tax law classifies those as transactions intended to erode the U.S. tax base and taxes them.

Foreign banks argue that they should be able to fund their U.S. branches with third party debt or cash, which wouldn’t incur the same tax bill. Khosla’s job is to get the Federal Reserve, the Treasury Department or both to change their rules to avoid one U.S. law requiring the banks to use loans that another law will subject to additional taxation.

Tariff Complaints

The key to getting a problem on Khosla’s radar is to have data to make your case. Anecdotes about job loss or leaner margins don’t cut it, he said.

As of late, trade has been taking up more of Khosla’s time. He’s been handling a barrage of trade-related complaints, and could face pressure from Senate Republicans to try to curb the administration’s ability to levy tariffs.

Tariffs imposed on European steel and aluminum and a number of Chinese goods, as well as threats of additional levies, will likely make those conversations even more tense.

“Nothing on Capitol Hill is ever its own entity,” Khosla said. “Things always bleed into each other.”

Bloomberg News