Speculation on Big Beautiful Bill 2.0 in 2026, LFG Daily - December 30, 2025

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Just to clarify, the below is speculation. Big Beautiful Bill 2.0 has not been passed, and nothing is guaranteed below. This is just how we are thinking about it and potential changes that could occur to keep on your radar.

Big Beautiful Bill 2.0: What’s Next for Taxes?

As Congressional and White House negotiators jockey to advance a second major legislative package following the enactment of One Big Beautiful Bill Act (OBBBA) in 2025, speculation is mounting about what “Big Beautiful Bill 2.0” could mean for the tax code — and, more importantly, taxpayers and businesses across the country.

Below we break down the key areas where tax changes may be proposed or are currently being discussed — including potential expansions, corrections, and contentious pivots ahead of the 2026 midterms.

1. Making Tax Cuts Permanent vs. Phasing Adjustments

One of the core achievements of OBBBA was anchoring many of the Tax Cuts and Jobs Act (TCJA) reforms — including lower individual tax brackets and higher standard deductions — into law beyond their previously scheduled 2025 expiration.

Speculation for Bill 2.0 includes:

• Permanent lock-in of expanded deductions — such as the higher standard deduction — beyond current sunset dates.

• New proposals to tweak phase-out thresholds on deductions and exemptions that now revert periodically under current law.

  
  

Proponents argue this will provide even more certainty to families and businesses; critics warn about ballooning deficits if temporary breaks become permanent.

2. SALT Deduction and Broader Deduction Policy

The prior bill temporarily raised the state-and-local tax (SALT) deduction cap from $10,000 to as much as $40,000 for many filers — a major shift especially in high-tax states.

Big Beautiful Bill 2.0 might feature:

• Further altering SALT limits and income thresholds — possibly adjusting the income phase-out or sunset timeline.

• Renewed debate in the Senate and among Republicans about whether SALT subsidies should be targeted or broader.

  
  

This remains a central negotiation point, with some lawmakers pushing to moderate the benefit while others seek to cement it for a broader base of taxpayers.

Child & Worker Tax Credits: Expansion or Limitation?

OBBBA boosted the child tax credit and introduced new deductions for overtime and tipped income — moves proponents say raise take-home pay and boost low- and middle-income families.

In Bill 2.0 discussions:

• Some Republicans are signaling interest in expanding the child credit even further or altering eligibility rules. Others want to tighten benefits in line with budget targets.

• There’s talk about making recent temporary deductions for tipped and overtime income permanent — though opponents worry about complexity and cost.

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Energy & Business Tax Incentives Under Scrutiny

While the previous bill scaled back certain clean energy incentives, future iterations may revisit energy tax credits and R&D incentives amid broader economic goals.

Potential speculated changes include:

• Reinstating favorable treatment for certain clean energy credits or moderating phase-outs.

• Adjusting business deductions tied to domestic R&D and investment — potentially tightening or broadening eligibility depending on political and economic priorities.

  
  

These conversations are likely tied to broader GOP strategy around competitiveness and investment growth.

International Tax & Business Provisions

The intersection of domestic tax policy and international competitiveness could be another battleground in Bill 2.0. Provisions on global tax enforcement, penalties, and transportation of profits across borders may be revisited.

This includes:

• Reevaluating anti-foreign tax provisions and how they affect U.S. businesses abroad.

• Potential tweaks to international minimum tax rates and foreign tax credits.

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Deficit & Long-Term Outlook

Any proposal to expand or extend tax breaks feeds into the larger fiscal debate in Washington. Analyses of prior bills estimated that making temporary breaks permanent could add substantial sums to the deficit over the next decade.

Look for debates around:

• Balancing tax relief with deficit control.

• Potential offsets through base-broadening or compliance enhancements.

  
  

What to Watch Next

As 2026 approaches and lawmakers return to budget negotiations, this next phase of tax policy could shape the economy for years:

• Committee hearings and markup on specific tax provisions.

• Senate vs. House differences that could slow or reshape proposals.

• Economic data and forecasts, which could influence political appetite for tax cuts or revenue provisions.

  
  

Stay tuned — and if you’re advising clients, updating projections now may save costly revisions later.

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Colin Symons, CIO Lloyd Financial Group

Like I said yesterday, there’s been a lot of concern lately, despite the SPX being less than a percent from highs. I understand the concern that stocks are expensive but that’s something I’ve been hearing for over a decade. In my mind, as long as we have growth and liquidity heading up, it’s hard to get overly negative.

It’s pretty likely there’s still room to go up. One way to look at that is something like the credit spreads seen below. Yes, credit spreads are pretty tight from a historic basis. That said, the Fed is now providing liquidity and the economy looks good. Why can’t we get to the lows seen in September? I could also point out that in 1997, that spread got as low as 0.74.

Yes, this party will end. Stocks are very expensive, which makes them delicate. While I think we see problems in the next few months, we don’t currently have obvious problems. There’s time and space for markets to continue the uptrend. In theory, the recent surge in GDP can invigorate the economy and we can have another year similar to this one.

There will be problems, and I’m trying to spend a lot of attention on the possibilities. At these valuations, things can go south quickly. That said, the potential for gains also seems significant. Going back to that 1997 date, for instance, there were certainly worries and concerns, but we kept on going. Stocks spend a lot of time climbing a wall of worry.

Personally, I don’t expect the flood of liquidity that a big boom like the late 90s would probably require, but I wouldn’t dismiss it. A lot can happen in a year. Personally, I look at the current setup and see room for improvement but within a dangerous environment. For now, things are getting better and that’s what I have to respect. Problems will come but I need to see real trouble before I get more conservative, as the potential for gains in this environment is just too high to ignore.

Pending Home Sales was up 3.3% m/m vs. exp 1%. That gets sales the highest in almost three years, though to be fair, sales have been terrible vs. history for quite a while.

Dallas Fed Manufacturing was -10.9 vs. prev. -10.4, with capacity utilization falling sharply.

China is telling companies to use at least 50% domestic chips for new AI capacity, as they attempt to wean off reliance on foreign technology.

Silver was -9% yesterday, the worst day since early 2021. It’s bouncing about 3.5% this morning. $84 to $72 to $75. Getting dizzy, which is better than leveraged longs feel...

Santa took a little step back yesterday, with SPX -0.35% on tech weakness.

Chicago PMI and FOMC Minutes, today.

What does it all mean? Everything’s fine, but SOFR/IORB spreads show money markets could use more funding, something that should help liquidity get even better next year.

Don’t leave your financial future up to chance. Let’s build a plan that gives you confidence today and peace of mind for tomorrow. Click here to schedule a meeting — I’m here to help you take the next step toward financial freedom.

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