Sure. Because people who have overstayed and broken the law and have little, if any money, are likely to be able to pay the $500/day anyway, or care that they might have to, since they can’t in the first place.
Sure. But there is also a law (or needs to be) that before being granted residency, all fines owed must be shown to have been paid in full. So the people who willfully remain in the country without a valid visa, and then get adjudicated as such, and then have fines assessed, will never be granted residency, much less citizenship, until all those fines are paid in full.
Why not just say that anyone who breaks the law coming into the country can never be allowed citizenship. Otherwise people that have the means can just keep breaking the laws.