For the most part, reputation comes from contributing content. Moderation tasks -- flagging, seeking clarification in comments, reviewing, closing, reopening, deleting -- make the site better but not by contributing content. If we were to award rep for flagging, we'd also see calls to award rep for all those other things -- so if you want to go down that path, we should have a conversation about rep for site curation, not just flagging.
As a moderator, I would object to rep for flags. If we award rep, people will go hunting for things to flag, much of which will be either borderline or spurious. This adds to the moderators' workload without helping the site. Further, when handling flags I already have to be mindful sometimes of flag badges, but they're just badges so I usually say "eh" and do the expedient thing rather than the strictly-correct thing when handling flags. This is especially significant with comment flags:
If a comment is flagged and a mod deletes the comment, the flag is automatically marked as helpful. Some people go through and flag bunches of individual comments instead of flagging the post (and we'll see more of this with rep on the line); if I move the comments to chat all those flags get validated unless I specifically decline them first. But if I chose to relocate it rather than nuke it, it was probably ok content. (Actual rude comments get deleted before I move the rest to chat; those flags would be valid.)
There are some cases where, if it's important, mods need to remember to decline a flag on a post before taking some other action (like closing a question or deleting an answer). But if we forget, the worst that happens is somebody gets an extra point toward Deputy or Marshal. With rep involved, though, you'll be asking us to expend the extra effort and attention while also getting more flags overall. And then we'll probably need to develop a "cancel flag rep" thing, like we have if the author of a post rolls back your suggested edit, which will require design and development...
Even if the change didn't hurt moderation, it still wouldn't be worth it because of the can of worms it opens. With the change adding to moderator workload without a clear benefit to the site, this sounds like a harmful change. The gold Marshal badge ought to be enough.