Isnt this double taxation?

Hi. You know, this is a really good question. and when I first encountered this (I'm in California; they do the same thing.) I thought the same thing. But here's the deal: it's because your state income taxes are deductible on your federal income tax 1040 schedule "A" Itemized Deductions. And since you had more withheld than you owed (that's why you got a refund.) you paid less FIT than you owed, because your deduction for SIT was too large by that amount. So what they do is just add it back in, to your FIT. Does that make sense? Anyway, if you can see how this works, you will feel better, because it works out fair to you.