That assumption doesn't follow, at least not directly. Sure, the extra compensation for a highly taxed high-income employee could come from paying a low-income

That assumption doesn't follow, at least not directly. Sure, the extra compensation for a highly taxed high-income employee could come from paying a low-income employee less, but it could also come from charging more money for the product or cutting expenses elsewhere (maybe by firing a few other high-income employees). I think the implication is that companies will naturally equalize after-(state)-tax incomes for high earners so that they don't go to competitors in other states with less-fair taxes. (And yes, the company may not operate as efficiently after reallocating funds to compensate for state taxes. I think this reinforces the article's point about cities being "near the peaks of their revenue hills".)