Your reasoning is flawed for a variety of reasons you have probably not considered.
1. A report system implemented would only affect Taleworld's official servers. This is an issue because people will nearly entirely stop using the queue system once custom servers are implemented.
2. Hate speech is entirely objective, and this becomes an issue when most of the devs and the community managers are not from North America (like you seem to be). What is hate speech in Turkey is not hate speech in Europe and what is hate speech in Europe is not hate speech in North America. We have already had an issue in the community with this, as some Taiwanese players playing on Asian servers criticized the Chinese government and were banned by rogue moderators from China for hate speech (under the guise of cheating). Although this situation was resolved and the individuals were unbanned, it demonstrates the different standards that different regions will have.
3. Who will be filtering through these reports? Will Taleworlds dedicate paid staff to moderating this? Probably not, instead if such a system is implemented I predict they will call in unpaid interns under a system they will probably make a forum post about, with some smooth words about "community involvement". After this occurs, you will have untrained, unsupervised individuals from the community handing out bans for a game that individuals have paid for.
4. I still do not see why people are forced to participate with a chat and be "uncomfortable" when the mute button exists. Just hit the mute button. It's there... and I believe it permanently mutes individuals you click the button on until you unclick it. Considering the 100 active people in the entirety of North America, it seems fairly easy to just click click click and the issue is resolved.