I think it's good that we are not rewarded for flagging. The incentive should be cleaning up the neighbourhood. Think of it as volunteering to clean up your favourite beach so that you can enjoy it more.
Retaliation flagging is a problem on here and it's something that needs a better solution. If I have a legitimate reason for flagging someone, I should not have to fear retaliation because of petty reasons. This is what prevents more of us from flagging when it's warranted.