For some reason, Riot insists on this hardcore form of punishment for no reason. Honestly, it's probably just to make more money from people who get perma banned and then get another acct and spend more to get more stuff. It's ALWAYS about $$$$$$.
Your suggestion of being perma banned from chat is great, if the user is just a flamer but otherwise tries their best.
If someone is always feeding on purpose, then they should be banned for a period of months, say 3 months at a time or something.
You are correct, no other game has this kind of punishment system.
I also play CSGO and people swear ALL the time on there, yet if I compare League to CS, I would say League is a much more toxic community. It is because Riot does not actually care about toxic players; all they care about is making $$$$.
The only time I ever play League is with a group of 3 friends or more. Never play ranked alone, never play draft alone. It is all trash for solo players.