Welcome to the tax code! Apparently you never paid attention to what was going on in the real world until now. Well now you know, when a business has a loss they can spread it out over future years. The reason said tax deduction exists is because the government, many years ago, had thought that keeping hurting businesses in business, instead of having to go under, was a good thing for the country - creates jobs, which the employee pays taxes on. In the long run it doesn't in any way, shape, or form benefit the government to have businesses fail, far better to try to keep them alive. Thus arrived the tax code in question.