I think that a form of this was in place in Germany back in the nineties. Actually it's quite a personal choice concept. The more you put in the recycling bins, the less you pay (extra since your taxes are already paying for the recycled stuff) for your own trash collection. It seems better than having it be against the law with fines at the ready if you don't recycle....such as is the case in some places already.
Why not fill the recycling bins with busted up, broken down OTHER SMALLER recycling bins? Would you still get to pay less? :)