Wealthy Texans Gain Most from Trump's 'Big, Beautiful Bill'

Most every Texan stands to see at least some benefit from the tax cuts at the heart of President Donald Trump's "big, beautiful bill." But the biggest benefits are geared toward the wealthiest people, who will not only continue to enjoy hefty tax cuts but also gain access to a host of new tax breaks of little use to most working and middle class families.

Analysis by the Institute on Taxation and Economic Policy found that 45% of the savings from the bill, which narrowly passed the Senate early Tuesday, would go to taxpayers earning more than $360,000 a year. Those are the country's top 5% of earners.

"The changes predominantly benefit the owners of capital," said Joe Hughes, senior analyst at the think tank Institute On Taxation & Economic Policy. "There's not a lot of extras for workers and families."

The spending cuts and increased debt load required to pay for those tax breaks have divided Republicans, with the Senate narrowly passing the legislation 51-50 after more than 24 hours of votes on amendments. Three Republicans opposed the bill: U.S. Sens. Thom Tillis of North Carolina, Rand Paul of Kentucky and Susan Collins of Maine. The measure now heads back to the House, where Republicans will need to sign off on the changes before sending it to Trump.

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Among the winners in the latest version of the bill are some of Texas' wealthiest families and biggest brands, including companies like H-E-B, Exxon Mobil, Enterprise Products and the Houston Texans.

Some new tax breaks are aimed at the working class, like no taxes on overtime or social security checks, and Republicans are hoping the tax cuts to the wealthy will stimulate the economy in a way that benefits all.

"President Trump understands that the real key here is getting our economy growing again," said U.S. Sen. John Cornyn.

But Democrats and other critics argue the changes will further income inequality and decimate access for impoverished Americans to critical programs like food stamps and Medicaid.

Here's who stands to win biggest in Texas:

Unincorporated companies

Imagine you own a medium-sized oil company in Texas that pulled down $2 million last year in profit. You’re not registered as a corporation so all of the earnings flowed straight into your personal bank account -- known as a pass through. Until 2017, you would have paid taxes on all of that income, just like any worker would on a weekly paycheck.

But under the Trump administration’s 2017 tax cuts, you are only taxed on a portion of that profit – $1.6 million. Under the new bill, that threshold would fall even more – amounting to more than $180,000 in savings on your tax bill.

It can be difficult to determine which companies are operating as pass-through entities. But grocery store chain H-E-B, pipeline company Enterprise Products and the Houston Texans all operate as limited partnerships, a common designation for pass-through businesses, said Brady Williams, an accounting professor at the University of Texas at Austin.

"It's tricky," he said. "In some of these really big businesses there are partnerships that own corporations and corporations that own partnerships. It's often not a clean single entity."

Representatives for all three Texas companies did not respond to requests for comment.

The pass-through tax break is expected to deliver $79 billion in savings, mostly to top earners. That’s compared to about $10 billion back to working-class groups like waiters and hairdressers from the new tax break on overtime and tips.

Small businesses will also benefit heavily, but around 98% of the tax savings for pass-through businesses go to large corporations, said Hughes.

"Hedge funds, investment firms, they're making billions of dollars, whereas a bakery might be making $100,000 a year," he said.

And while the tax breaks on overtime and tips are set to expire at the end of 2028, the tax break for pass-through businesses will be made permanent.

Families with more than $14 million in assets

Up until 2017, heirs to a large estate were only taxed when the inheritance exceeded $5.5 million.

Trump temporarily doubled the exemption in 2017, and now he's looking to make it permanent, allowing individuals and married couples up to $15 million and $30 million in estate exemptions, adjusting for inflation over time.

For the ultrarich, like billionaire Tesla CEO Elon Musk, it might not make much difference. But for most wealthy families, that tweak works out to a significant savings, said Eric Reiss, a law professor at the University of North Texas-Dallas.

A family with $100 million in assets would expect to pay $28 million in inheritance taxes under the new tax code – up from $10.9 million under the old code. Most individuals won’t even end up paying that total amount because a lot of their money is moved into a trust and other tax shelters.

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"Say you have a family business, you sell it to a trust for kids in exchange for a note," Reiss explained. "All that property is now in the hands of the kids, and all that's left for the estate is the note, which is frozen in value. All the future growth goes to the heirs."

The move to reduce estate taxes follows a decades-long period of wage stagnation for the working class, at the same time the richest Americans have steadily increased their share of the nation's wealth.

And with Republicans moving to cut programs like food stamps and Medicaid, the financial position of poor families is likely to become more untenable, said Shannon Halbrook, a director at the non-profit Every Texan.

"Since the 1980s we've seen this leveling off of real income for most folks, whereas the folks at the top are making more and more," he said. "It’s a national trend, and we've definitely seen it in Texas."

Oil companies like Exxon Mobil and Occidental Petroleum

Those big LNG export terminals being built along the Gulf Coast, not to mention the petrochemical and carbon storage projects under development, are set to get a big boost.

Under a new provision in the tax code, companies can deduct the cost of machinery and other equipment from their taxable income all at once. As it stands now, they can only deduct those costs as the equipment depreciates over a period of years. Taking the deduction up front means they get that money now, to invest in other projects or increase investor returns through dividends and stock buybacks.

That is likely to aid companies like Exxon Mobil, which is in the midst of an expansion at its sprawling Baytown petrochemical plant.

"Let's say I give the option to reduce your tax bill by $1,000 this year or $100 a year for ten years, you're going to be better off taking those savings now because you're the one that controls the cash," Williams said. "You can stick it in the bank and get interest, whereas if you take those same deductions and spread them out into the future, those savings are not accessible until later."

Exxon representatives did not respond to a request for comment.

For large projects like factories or LNG terminals, the savings could add up to $66 billion a year nationwide, according to an analysis by ITEP.

Meanwhile, while Republicans are using the Trump bill to cut most clean energy tax credits, they have opted to keep carbon capture subsidies intact, with one caveat.

Oil companies that capture carbon and pump it underground to increase oil production – a well-established industry practice called enhanced oil recovery -- can now claim the same $85-per-metric ton tax credit as companies that are simply storing the carbon underground.

Injecting carbon for oil production doesn't reduce greenhouse gas emissions as much as storing carbon underground. But for companies like Occidental Petroleum that are developing carbon capture facilities to aid in oil production, the savings could be big.

With hundreds of carbon capture projects under development around the country, some developers might switch to selling the carbon versus permanently storing it underground, which requires a lengthy federal permitting process, said Greg Matlock, an energy analyst with the accounting and consulting firm EY.

"It's a big deal. There's 300 projects in the pipeline in the U.S. and there's been a significant delay in getting permits at EPA," he said. "There’s a path for a two step, with developers doing EOR first and later switching to carbon sequestration."