I let the pirates attack me as a handicap mechanism...Used against the AI = easy win.I have done it a couple of times, one time I saw wounded enemy ships flying around, so I jump to his home system and find the pirates there blowing up his last buildings and the planet health at 2000/6000 while its still being bombed, the pirates broke the enemy fleet and it escaped in tatters and they were bombing his homeworld to dust!Pirates also SCALE by how much you bid. If you don't bid at all the AI will put 250 on you and the pirates will attack you with a small fleet. One game I put 500 and the AI put 750 on the first attack, the pirates level increased from one to two bars. Then the next attack I put 750 and he put 1000... the pirates went from 2 to 4 bars...That 4 bar pirate attack was enough to kill the 2 capital ships and 10 or so supporting ships with them protecting the planet, AND bomb it to nothing...Ofcourse I am a much better player since... but the pirates are also a lot weaker when you are not bidding. level 1 pirates can be beaten by a single level 1 capital ship. level 2 by a capital ship + 10 frigates. level 4 will kill 2 lvl3 capitals and 15 frigates... I shudder to think what level 5 pirates would do to the AI... and they are SO VERY CHEAP!Also, if you let pirates destroy the structures in orbit, they will leave as soon as they are destroyed, so a besieged planet can survive by scuttling all structures in orbit... HOWEVER, if the pirates "win" an attack like that the pirate fleet will go and reinforce the defenses on their home.Every 15 minutes a new pirate fleet SPAWNS out of NOTHING in their home system (try being in the pirate system when the timer runs out), any survivors of the pirate fleet attack on a planet reinforce their home defense.. its pretty hard to take a pirate home with 150+ ships defending it.It really makes no sense... why are they spawning? how do they add another 15k credit and 5k metal and crytal worth of ships when you just added 1k to the bid? Why are they not praying on my trade lanes? I want pirates to attack freighters, not planetary fortifications! And not to the death.
Pirate ships do not cost anything in metal and crystal - nothing at all. Their ships' price is in the form of cash only. The Pirates' cheapest ship is the Rogue light frigate, which costs 600 cash and no recourses. Their most expensive ship is the Cutthroat SRL(Short-Range Laser

) frigate, which costs 1300 cash and no resources. The Cutthroat also has an ability who's name(AbilityStealResources) implies that it can steal resources and cash from a planet by attacking refineries and trade ports, so this may have an effect.
But a 1000 cash bounty and a single asteroid(the Pirate base) worth of tax income, as you said, is not enough to buy them even a single raid's worth of weaponry. Here are my theories of how the Pirate economy works:
1. Apart from bounty, the Pirates also get any money that players spend when buying things directly from the Black Market(not from other players).
2. The Pirates get to collect the cash from all bounties placed on any player, and then have a 'technology' which doubles the cash and allows them to buy ships.
3. The Pirates have a 'technology' that doubles all their income, and they get money from tax(on their base), raiding with the Cutthroat, killing trade ships, getting a cut of all Black Market transactions and selling the unlimited resources that are always available on the Black Market. With this considerable income, they buy ships and go on raids.
4. They just cheat and get free ships that spawn depending on the level of bounty their target has on their head. They have no such thing as 'fleet cap', so they can just amass ships until someone blows them up.