The extra capacity to handle that unwanted traffic is paid for out of ISP subscriber fees. When a mail server is crashed because of the spam load, everybody pays. Further, ISPs are having to dedicate technicians to answering spam complaints. Those technicians are busy handling spam instead of maintaining and improving services, and they are paid for out of subscriber fees as well. It's illegal for your ISP to block it for you.
Mail servers are usually private property.
Their owners, be they ISPs, other companies, or government institutions, can do whatever they want with them. The limit is in their contract with their customers, not in what the spammers want. If an ISP blocks spam and customers object, those customers can take their business elsewhere. In most cases, the customers object only if the ISP blocks spam without telling them. Small businesses can't compete on the Internet without it.