I always thought that it didn't matter where you earned your income, you paid state taxes to the state that you lived in and only that state.
I'm not sure where it says this, but you are right. I curently work in Virgina and pay taxes to Maryland (though when I was briefly unemployed a little over 2 years ago, I filed for benefits in Virginia since that's where I ha been working -- complicated, I know).
My post didn't make it clear, but I lived and worked in Pittsburgh in 1998. I had never lived in Maryland prior to moving in April 1999. I used the Maryland address on my TY 1998 1040 because that's where I lived at the time of filing. My TY 1999 Maryland filing explicity uses the form for part-year residents because I moved there that year.
Maryland has come around, with no reasonable suspicion or probable cause, demanding that I open up my financial records to them for TY 1998 -- this is where I draw the line. If they cannot produce any evidence that even hints that I lived or worked in the state (voter registration, DMV records, employment records, banking, utility, lease, mortgage, etc.) -- which they cannot, because none exists -- then I have to assert my Constituional rights against unreasonable searches (and, if it gets to garnishments, seizures).
Maybe I should see if a Constitutional lawyer wants some publicity by taking on the State of Maryland... (I don't care about any damages, I just want them off my back -- and everyone else's).