Cops do extremely dumb stuff. Pulling their car in front of you (easy comp), climbing up ladders after threatening to taze you, and engaging huge groups solo. Some ideas:
Add tiers to rebel that give gear and weapon discounts, or just add a flat discount for armor and weapons. If people want gear to actually be meaningful, then punish cops for being dumb via a flat respawn fee. In real life, police spend huge amounts of money on gear and vehicles. Losing a vehicle or a gun is expensive.
Either rebel/civ gear should cost less, or cop gear should cost more. Maybe give a reward for killing cops because there is next to no point in actively fighting them.
Cops could drop badges when they die, which could be turned in at Rebel for money (or warpoints).
You can use the same tactics to avoid vigis, as you can with cops. Don't walk around Kavala with a 500k bounty. Don't walk around unarmed and without armor. Don't be solo. It is pretty easy to avoid being vigied in most cases. It is pretty much the only way to rob people on the server and it should stay. I need my cop tazers.
The server isn't as important as the time. Farming early in the morning US time on any server will be much more profitable than farming on Server 3 at 9pm ET
Are you solo or in a group? What server and time do you play? If solo, Oil can be decent, as can salvage. Keep in mind, oil is a lot heavier than most items, so you really don't earn much.
If you are in a group, get some gear and run diamonds. However, I don't recommend running diamonds during prime time as big gangs will rob you. If you have a lot of money, farming anything in a HEMITT/Tempest can be profitable, but be careful, they are slow and huge targets.
I will sell you 6 mil money at 1.2x the current rate, then you give me tazers, and I give you tazers for 5 mil.
Only Economic majors can understand complex trade deals like this.
Arma 3 has been out for over 5 years now. People get tired of playing the same game every day. People get tired of monitoring a server every day year after year. People go to college, get jobs, get girlfriends, etc. It happens with every game. New people will come in, so don't worry.
In a 1v1 against a civ with no armor? Maybe.
In a 1v2+ against civs with no armor? No.
Cops are the ruling party of Olympus and there is a finite amount of them versus the hundreds of players that log on each day. So it only makes sense that they get special privileges to balance things. Also, they have to blare their sirens or talk to you before engaging, so you should have to run away or prep to fight.
Honestly, most of the cops I have fought weren't great at PvP (MOST), so if you are decent, you should be able to kill a few and escape.
How do you guys earn money when you play? There is a lot of stuff to farm, but things like moonshine seem to generate less revenue than heroin or mushrooms, despite being a lot more work.