While the argument you're making is sound, I'd challenge you to think of it this way: gitLab wants the best talent, no matter where they live. If they happen to live in a high cost area, vs someone that lives in a low cost area, both uniquely qualified, would it make sense to make sure two qualified candidates get approximately the same buying power's worth of compensation? Companies already adjust base pay based on your location, Google, for example.
It also takes a bit of the good versus bad negotiator penalty out of the equation, which provides a level of fairness that doesn't exist in most companies.
So do I, that's why I don't work for a company that says "well you life in a low-cost area, so you need to charge us less".
Their policy is transparent, and it is take-it-or-leave-it. I think the salary gripes you're hearing from many commenters is that they are leaving it, when they'd very much like to work for Gitlab, as it's a company I personally like.
However, what they're doing will either get them developers in the most highly-paid areas (where their salaries are actually competitive) or lower-paid developers that are actually not the best their local market has to offer (because the best developers are already employed elsewhere for higher pay). So, in essence, what they're doing is limiting their top-tier prospects to people who live in high-cost areas.
As another commenter said at some point, living in the Valley has such high cost because there are benefits to it. Developers in SF can find a job more or less the minute they walk out of the door of one company, and that's something that's expensive. I don't have the same luxury, and Gitlab says "well, since you aren't paying for the privilege of job liquidity, we'll give you a lot less money".
That being said, in order to align with their values of transparency, they shared an algorithm that makes sense. It's not the only way to do it, but it's transparent and doesn't seem unreasonable.
Startups are about alignment to the big picture and long-term. I'd imagine that's why they don't change equity based on location. However, The free market being what it is, some will take it and others won't.
Anyway, more power to them, great way to filter out remotes who know what they're worth for no particular reason.
If you are a developer / professional living in a rural area and don't want to move or have a commute, I'm certain you'd find gitLab both lucrative and a fun place to work.