Ok this is my proposal on how REPUTATION matters and it is directly linked to your Steem Power and Steem Dollars.

I am rather new to Steem but I am seeing abuse by people who ruined their reputation because they know it doesn't affect their Steem Power or Steem Dollars.

Your Reputation should influence how you can delegate your Steem Power for upvotes or downvotes. If your Reputation is higher then you can delegate more Steem Power for voting up or down. If your Reputation is in the negative then you can NOT vote at all and you can't delegate Steem Power to another person or give away Steem dollars to another person until you fix your REPUTATION.

This is how it is real life. No one wants to deal with a Bad Reputation or Negative Karma person. And people are less likely to even listen to Bad Reputation person. Until someone can fix their Reputation then they can start voting or flagging again. This will prevent people from abusing their accounts or transferring Steem Power or Dollars to their dummy accounts.

This will be probably easier to program then to redo a whole new system as proposed by Scipio.