JSFiddle - React, Tailwind, and code Playground

HTML

<select data-bind="options: items, optionsText: getOptionText"></select>

JavaScript

var viewModel = {
    items: ko.observableArray([
        { Text: "Item 1", level: 1 },
        { Text: "Item 2", level: 2 },
        { Text: "Item 3", level: 3 },
        { Text: "Item 4", level: 4 }
    ]),
    getOptionText: function(data) {
        var value = "";
        for (var i = 1; i <= (data.level - 1) * 2; i++) {
            value += "&nbsp;";
        }
        value += data.Text;
        return value;
    }
};
ko.applyBindings(viewModel)