It's called source taxing (taxing income from an outside source) and the SC has ruled it unconsitutional for federal and military retirees. I think this is who they're really trying to protect but as some sort of consolation prize they are rolling in state workers as well.
It's like this, I worked for Uncle for over 20 years in the military and refunded taxes back to Uncle and my home state (assuming I had a state of legal residence that taxed me while away from home) for those 20 years. Then I retire to another state and that state taxes my retirement from Uncle. As the SC says, not legal.
If I had worked in the state, was a resident of that state and then retired in that state all those years then the state could tax me, but it's not the case all the time.
I'm no expert on tax law, just basing my opinion on what I know.
SZ
Do you know the name of that ruling, by any chance?