“why is it so far fetch for the government to consider that as well when taxing those salary”
Because this creates a system that can be gamed. “Oh, it’s so expensive to live in RSF… I have to have a lower tax rate”.
You’re already getting this in expensive areas because you have larger deductions for mortgage interest and property tax that people who live in smaller areas.
“But you are denying them the incentive to work harder.”
By the time you are at 250K earned in your hypothetical “doing overtime” scenario, you long ago stopped paying CA/UI and SS taxes, and you long ago capped out your state tax rate so your marginal tax rate has in fact dropped.
