Imagine you're recording highly dynamic music, like Jazz. Clipping is absolutely never OK. You have to leave tons of headroom, there's no other way. So 16 bits is not enough for live capture — especially when the source is dynamic or the recording conditions are chaotic.

The studio I used to work at was one of the first ADAT studios back in the 90s, and they did a lot of rock. One of the ways they got past the limitations of the medium was to compress and limit to tape. You generally don't want to do that unless you have tons of time to set up and get it right (a la Rudy Van Gelder), which was not in most budgets. But it worked well enough and the ADAT recordings out of this studio sounded way better than most.

Mercifully storage has gotten cheaper in the decades since and you really shouldn't capture to 16 bits any more.

My understanding is that 24-bit source material (the standard when I was last recording which was several years ago) provides enough dynamic range that you can bring up the desired volume without overly muddying quiet sections with noise, especially when mixing multiple sources where that noise adds up quickly. My own personal experience recording at 16 bits was… “I must play louder and overstate my song’s understatements” because I never could get a 16 bit output that didn’t sound like garbage. Granted I’ve never been more than a novice at recording and I’m certain there’s more I could learn to work with the lower bit rate but… why?

And pay for. Larger data size across the chain isn’t costless.