[AngryJawa]

We in Georgia pay state income taxes on one's federal refund from the previous year...neat, huh?

[Still Thinking]

That's OK as long as your witholding is deductible. I suspect they probably allow you to deduct your withholdings, then, to make sure you are receiving a deduction only for the actual net TAX paid, you must subtract any refund (albeit from the previous year).