Exactly. If not, the states then get to keep a large amount of money while the feds then do a rougly equal split of tax revenue to states. It's a cheaters' way to basically rob other states to fund your own agenda, and I hate it.
While I think you're right in principle (it makes more sense conceptually to deduct fed tax from the state tax) I think the practice is that most of the high state tax states pay in far more to the government than they receive and the other ones are usually moochers.
Yeah, but that's a consequence of having a redistributive progressive tax system.
Rich, high income states will subsidize poor low income states.
Why it so happens that the rich, high income states these days are liberal with high taxes and the poor ones the opposite, is an interesting question without an obvious answer.