I thought it was written in the IRS code ie: US resident citizen's pay tax on world wide income. If I earned $10000 in five states, then my w2 would show $ 50k in box 1. If all 5 states had income tax, then each state would show $10k income. As Bill said there may be slight differences if a state doesn't tax some income that fed does. By and large if your income is w2 wages the federal and state income should be close not a $98k difference