I own both 401k, which is mostly in mutual funds (and which are hurt every time you try to hurt Steve Balmers of this world) and also I manage some after-tax po

I own both 401k, which is mostly in mutual funds (and which are hurt every time you try to hurt Steve Balmers of this world) and also I manage some after-tax portfolio on my own (the experience I warmly recommend to anyone who is trying to understand the effects of proposed tax changes on ordinary investors). > And then wash trades a million dollar "paper loss" in their portfolio to cover for the $1 million they cashed out. This scenario that bothers you is pretty much unrealistic. It’s mathematically impossible if your portfolio grows to offset each cash out with a paper loss. Especially with securities you want to hold. Usually you just sell, register an offsetting loss and forget about the losing stock. And in your calculations you forget the price I paid into the positions. So a year ago I had $200 and put them into stocks A and B, $100 each. Today I’ve sold A for $150, B for $50, got back $200 with zero profit per year. Zero profit - zero taxes, fair? Now I’ve decided that $200 is a bit more than I need and decided to put $50 back in the market. What to buy? Oh, B looks good at $50, let’s put $50 back there. Suddenly, the tax collector says “this purchase (spending money on the stock) turns your $0 profit into $50 profit, taxes please”. How comes? Note that my purchase of B back is not free. I will owe taxes if I sell it for more than $50 (previously - only if I sell it for more than $100). Also, for a year any profit on B will be taxed as an ordinary income, which can be much more than 18% on a long term sale. TLDR. “Wash sale” rule creates more harm than good for an individual investor, and any harm it inflicts on Steve Balmers of the world is inflicted on 401k’s of the working people.