Yes, it's backwards thinking to encourage compliance by increasing cost.
The service dog situation is a joke and need to be solved. Recently saw a service dog kind of jump at a cat in a carrier, besides being a general mess. That was crazy.

My suggestion is to vote with your dollar and fly Delta or Alaska at $100 with your pet. If you fly with your pet very frequently, one of the JetBlue mosaic perks is a pet fee waiver, which is an innovative idea.
J anecdotally also has a higher proportion of passengers with animals in carriers so let AA continue to lose a revenue premium from compliant pet owners. The A321T pet cabin idea was brilliant as AA is the only carrier where you can take a pet on a flatbed. Not that AA ever uses the pet compartment but I guess on paper they can accept the pets now. There are quite a lot of pets on the transcons and most passengers don't even notice them because they are quiet.