I think a lot of contention comes from flagging being called "flagging" instead of "downvote" or something else. Flagging to me sounds like something that should happen to posts with bad content, spam or whatever.
I agree with "flagging" rewards to help spread the Steem pie, but it sounds bad. Either "flagging" has to change name, or we need to change our perceptions of the word.

Edit: Although I would rather not have flagging posts to reduce the rewards, and instead some sort of mathematical built in alternative for spreading the pie.