Houston energy companies have reported at least $20 billion in tax benefits from the recently enacted tax overhaul, but whatever savings the firms realize will likely go to well-heeled investors rather than support the local economy through hiring, pay raises and expansions.

Since the Republican-controlled Congress slashed corporate rates from 35 to 21 percent at the end of last year, local energy companies have authorized billions of dollars in share buybacks and increases in quarterly dividends, joining scores of other American corporations in giving investors a bigger chunk of their profits. Economists said the trend could undercut the Trump administration’s assertion that tax cuts will directly grow employment, wages and economic activity.

In fact, the two biggest energy companies based in Houston, ConocoPhillips and Phillips 66, said the corporate tax cuts have had no effect on employee wages, bonuses or investment plans.

“What we know is that this bill increased corporate profits,” said Ryan Alexander, president of nonpartisan watchdog group Taxpayers for Common Sense in Washington. “A disproportionate benefit goes to the investor class. It was a predictable result, but it was not how it was sold.”

The oil and gas industry accounts for the largest corporations and employers in the Houston metropolitan area and drives the local economy. Over the past two months, energy companies with major operations here have together authorized more than $9 billion in share repurchases, a step companies take when they are flush with cash to boost the price of their stock and the value of their investors’ holdings, according to New York research firm Birinyi Associates.

A dozen companies, including Chevron Corp., Anadarko Petroleum Corp., Marathon Oil Corp., EOG Resources and Cabot Oil & Gas, also increased their quarterly dividends for the first quarter, the firm said.

All told, U.S. companies have launched more than $178 billion in share repurchases in the first two months of this year, more than doubling buybacks in 2017 and marking the highest amount since at least 2000, according to Birinyi. Proponents of the tax overhaul have argued these payouts will generate economic activity as shareholders spend the money, ultimately providing jobs and wages for workers. But economists and analysts say shareholders are primarily high income individuals who, unlike lower-income groups, would probably save much of the money, tempering the boost to the economy.

“There’s going to be a lot of pressure from investors to say, ‘You’re paying less to Uncle Sam, pay us more,’” said Craig Pirrong, a finance professor at the University of Houston

And even if investors spent freely, the impact would be limited, analysts said, because the economy is already running at full tilt. With the unemployment rate in Texas and across the nation near record lows and the economy growing at a healthy 2.5 percent clip in the fourth quarter, the Federal Reserve has signaled plans to boost interest rates at least three times this year, tapping the brakes on growth to avoid a rapid inflation.

“The problem is that this tax reform was approved when the economy was doing really well,” said Gustavo Grullon, a professor of finance at Rice University. “It’s going to be hard to find many projects. And shareholders tend to save more money than regular employees, so it’s not clear it’s going to create economic activity as expected.”

Little employee benefit

For the oil industry, 2018 could mark a year of transition. Major oil companies began focusing on returning cash to shareholders even before the corporate tax overhaul, particularly when investors last fall started demanding a sharper focus on returns after poor performances throughout the oil bust.

Corporate dividends came under pressure during the industry downturn, and companies slashed deep into the payouts after oil prices fell below $40 a barrel a few years ago. But now, with oil prices above $60 a barrel, the tax cuts will give oil producers and refiners more flexibility to deliver those returns by increasing dividends and share repurchases.

There’s still little evidence that the corporate tax benefits are finding their way to employees. ConocoPhillips, the nation’s largest independent oil producer, recorded a $850 million non-cash tax benefit in the fourth quarter, said changes in the U.S. tax law alone won’t dictate its spending decisions, which are focused foremost on generating shareholder returns.

The Houston oil company plans to spend an average $5.5 billion each year through 2020, and to the extent that tax reform improves the company’s financial position, it will make it more attractive to invest in U.S. operations, ConocoPhillips spokesman Daren Beaudo said in an email.

But that doesn’t mean the company plans to hire new employees or dole out bonuses with its tax savings. ConocoPhillips handed out performance-based bonuses in February, but “did not pay an additional bonus directly because of tax reform,” Beaudo said.

“We don’t expect a change in hiring,” Beaudo said. “We are continually evaluating our workforce needs in the U.S. and around the world and will add staff as our needs dictate in support of our strategy.”

Dividends rise, not pay

Earlier this month, ConocoPhillips announced it would increase its dividend from 26.5 cents per share to 28.5 cents per share and it lifted its annual stock buyback program by a third to $2 billion.

The refiner Phillips 66 reported one-time tax benefit of $2.7 billion in the fourth quarter. But the company said it doesn’t plan to increase its annual $2.3 billion budget this year. Its plans to reward some employees through incentive programs will base the bonuses on company, business unit and individual performances - not tax savings.

The Houston company, meanwhile, increased its dividend from 63 cents to 70 cents a share, and has spent $3.3 billion so far this year buying back shares.

“Shareholder distributions consisting of a secure, competitive and growing dividend complemented with share repurchases continue to be fundamental to our long-term strategy,” Phillips 66 spokesman Dennis Nuss said.

Chevron said the lower U.S. corporate rates makes investing in the Permian Basin in West Texas, the Gulf of Mexico and its refining and chemicals business more attractive. Chevron reported a tax benefit of $2 billion, but said it hasn’t changed its plans to spend some $8 billion this year and $25 billion over the next three years.

The company is not planning “to make major changes to any compensation or benefits programs at this point,” Chevron spokesman Sean Comey said.

Chevron raised its quarterly dividend from $1.08 a share to $1.12 a share, its largest increase in several years.

The pattern is clear, said Mark Knoll, co-director of the Center for Tax Law and Policy at the University of Pennsylvania: Money that becomes available tends to go to investors, whether by paying off debt, buying back shares or paying dividends.

“Every expectation is it’s going to go to shareholders,” he said. “The real economic issue is whether that’s going to lead to more demand, more investment, higher wages. We wouldn’t expect that right away.”