Dating is not illegal. Sexual relations can be. If you are not 4 years older it is not statutory rape. But there is coercion that could be alleged now or later if she gets upset.

Is it bad for a 16 year old to date a 14 year old?

Yes, its totally fine. Two years is absolutely nothing. The only reason its seen as taboo to people of your age group is because school puts a lot of emphasis on age barriers with the grading system. 16 and 14 dont look far apart when you look at the numbers themselves, do they?