Yeah the best way to deal with that is to make it clear to the PCs that any use of combat magic out side of a self defense scenario is going to get the witch hunters called in and the the witch hunters WILL FIND you and they will do bad things to you. Also dont ban all magic, fighters are allowed daggers well that means wizards get magic missile.
You can also point out that magic users are responsible for any and all collateral damage for any spell they cast.IE, If you get attacked by a gang of thugs and use a fire ball in self defense and burn the Inn down you may not be charged with magical murder but you still bought the Inn. The magic users are also charged the cost of all resources used to apprehend them by the way.