Definitely report it to the school. You need to know exactly which kid did it, report it, and tell the school you expect for the parent to be called and told what the kid threatened.
Tell the school that the NEXT time it happens, you will be calling the police to show up at the parent's doorstep.
I never had a kid physically threaten my kids when they were little, but one boy told my son that he was going to blow up my house. I talked to the summer camp director and she brought him in and made him apologize. He left my son alone for the rest of camp.
(I just remembered that my younger son had trouble with a kid in middle school, who DID threaten to beat him up. The school was TERRIFIC about it - called the kid into the office, warned him to not do it again, and then called his mom and let her know what would happen if he did. They also made him sit in the front of the bus for several months - the bullying happened on the bus.)
By the way, your son is only 7. The idea that you can't protect them forever applies when they are much older. Give that poor kid a break - again, he's 7!!!
Dawn