Wrong again.
Flags are meant to express disagreement over rewards, make content less visible (you can NOT censor anything on the blockchain, only the frontend can choose to display it differently), or effect the reputation of a user so others know not to fall for their shit in the future.
There are likely more reasons someone could flag someone. This system DOES NOT and SHOULD NOT dictate why someone can flag. Many people have many reasons.
When I flag someone, that money on their post that I remove goes to every other user on Steem. That makes me feel pretty good. If I could flag someone and burn that reward to never appear in the system again I would also do that.