Why is toxicity a bad thing? Well, let's see...
For starters, toxicity ruins communication between teams. If one person starts going out of their way to be an asshole, nobody is going to want to work with that person. Beyond that, they'll likely also mute him, thus cutting off any ability for said toxic player to communicate with his team if/when he stops throwing his fit.
Toxicity also lowers morale, which makes teams play worse. Positive feedback loops, despite the name, can be pretty fucking awful to experience, and it all starts with one small thing to set everything off. First it's toxicity/negativity, then something bad happens in-game, and suddenly everyone is expecting things to just keep going downhill from there.
Additionally, targeted toxicity (insults, flame), can aggravate/tilt/otherwise dampen the target's ability to play well, as well as those who aren't the target. I, for one, get aggravated whenever someone starts flaming, and I guarantee you I'm more likely to make mistakes when I'm aggravated than when I'm in a clear state of mind.
Fourth; Gameplay toxicity, naturally, severely decreases a team's chance of winning, period. Whether it's an intentional feeder or a troll or someone calling out positions over /all chat, they're going to make the game that much harder to win.
Fifth; the toxic player is making themselves play poorly by focusing more of their attention on flaming and being toxic in chat than actually playing the game. I've lost games because one of my teammates decided that it would be altogether better to just run off at the mouth instead of focus on the game and try to win. That plan didn't work out for them.
And, for the last point, I'll just quote The Djinn, as he put it pretty succinctly.
Simply put, I play League to have fun, and I understand that I won't win every game. When someone persists in behaving in a way intended to belittle, insult, or harass others, they're doing far more damage to my experience than someone playing poorly
So, now that I've answered your question, how's about you answer this one: Why do you think toxicity is a good thing?