They live in a productive location. When they leave it their productivity collapses.

I understand it’s emotionally satisfying to see them deprived, but the government also ends up with less revenue when they apply their skills to lower impact projects.

This is a specious argument. You can't measure expenditures that go solely to retaining the exclusive use of desirable land as productivity.

Large engineering firms have offices in various Midwestern states that are just as productive as SV, NY, what have you.

High-wage-high-cost and medium-wage-medium-cost arrangements are on balance pretty similar for the employee. Dramatically higher taxes on the former will push people to the latter. Which, as you note, they can do without even changing employers. There might be some lens through which this is good. Decentralization, or inequality. But tax revenue from this cohort will go down, not up, because there’s so much less income to tax in the first place.