Dont think there's any repercussions to that. I did the same first time around, shot him dead after he killed Simms. But then I reloaded the save point and after he shot the sheriff, I let him go, to which he said, "You'd better watch your back."
Yadda yadda yadda.
the fooker started shooting me after he done the sherif in, didn't get the chance to let him go...it was kill or be killed