You are wrong. You must always pay taxes on annual profits, but you can't deduct annual losses with wash sale rule. If your losing position will be profitable next year, you might never deduct your previous year losses.
Sadly you
usually don't know in advance whether you will have a profit or loss in the next tax year! Without the wash rule you
would be able to deduct losses! With the wash rule you can't deduct a loss generated by a "wash" transaction, so this rule prevents people from making such transactions. Therefore, you want to compare the net loss/gain between not making a wash transaction and not having the rule in place. When you do
that you will see that the net gain or loss is exactly the same!
If you assume, however, that having the wash rule in place is
ineffective in preventing people from making wash transactions, and therefore they are taking losses they can't deduct, then I would agree with you. Under these circumstances the trader will be cheated out of losses he should have been able to deduct. But this is not realistic for any experienced trader. Experienced traders don't do wash transactions! The rule is effective in preventing them.
So, in summary, you want to compare not doing wash transactions with not having the rule in place! When you make that comparison you will see that the net losses and gains are exactly the same regardless of whether you had the rule and therefore did not do wash transactions, or you did not have the rule and you did wash transactions till the cows came home. The net losses and gains are then exactly the same, and the only effect of having the rule in place is to alter the tax years in which losses/gains accrue. Depending on carryover rules and the variation of one's adjusted gross from one year to the next, I suppose this might make some differences. But are those differences worth the added paper work and complexity?
Frankly, I think the folks who came up with this idiotic rule were trying to prevent matching a big loss against a big, one-time, jump in income. Surely that is the only purpose of the rule --other than stimulating paper and ink sales, and I personally don't think it is worth the added complexity.
Now, if you have the rule and people ignore it and still do wash transactions, and therefore can't take deductions for losses, then I would agree that something has been accomplished, viz., traders are cheated out of deductions. But this is not the case. With the rule in place, we don't do wash transactions!
