Not accepting intolerance isn't being a dictator. Plus you can just switch instance if you don't agree with it's moderation.
The whole point of federation is shit communities can be dropped if they don't match up with your instances ideals.
The instance admins don't want the hassle of moderating content from bad instances and it's totally up to them.
If people don't like it they can move. No Biggie.
Will do. Enjoy your racism and transphobia I guess.