Timeouts

I don't understand timeouts. It seems that when people timeout, their rating doesn't go down. It encourages people to timeout on purpose. It's a waste of time to play with people who don't finish. I sometimes think that the rating system messes things up. Everyone knows that any human can beat any human at chess. If someone with 800 rating challenges someone with a 3000 rating to a rated game, they'll decline because they don't want to risk losing their rating. Isn't that like running away from fear?