I was curious to see if the bounty on my empire reduced when I colonized the last planet of the empire I believe put the most bounty on my empire. It did not appear to do so.

This I thought might be a good addition to the bounty system. Right now bounties are entertaining, but you really only have one option. If you want to reduce the incentive other groups have in attacking you your only choice is to increase the bounty on another empire. This provides the player with only one option for this system that is heavily ingrained in the game.

Why not consider adding three other options.

Option 1: The bounty on your empire declines by the uncollected balance created by another empire when they have no worlds left. The rationale is there is no one remaining to "write the check" This would give the player the option of attacking the player he guesses has put the most bounty on him. Ofcourse if he guesses wrong, he may have just wiped out a potential allie and the dangerous empire is still out there.

Option 2. Give the player the option of instead of collecting bounty, to use the bounty he/she collects to pay-off some of the bounty on his empire. This would give the player an advantage to collecting bounty since he usually has all the credits he needs anyway. This may provide the player with a similar motivation to go out and collect bounty just like the pirates or ai empires have.

Option 3. Collect bounty on pirates you destroy. Pirates have a lot of enemies including other empires, affluent people, and other pirates. They also may not be the trusting sort and may carry their treasures (collected bounty) with them. When their ships are destroyed you retrieve this bounty from their ship's black box. The larger the pirate fleet the more bounty you collect from their enemies and through confiscation.