I am a NYS resident but I worked part of the year in NJ. I am filling out the NJ NR form. Why do I have to base my NJ tax on a percentage of the taxable income made in NYS? I already paid NYS taxes on that income! Am I doing something wrong?

You will complete NJ return and report only the income you earned while you were in NJ.

Then on NTS return report all the income and claim credit for taxes paid to NJ.

NJ, like many states (including NY), requires non-residents to report all their income, although you pay tax only on the portion actually earned in NJ. They make you report it all so that they can get you for the highest possible tax rate that's "appropriate" for someone with your total income. Once you have the NJ-1040NR form complete, you deduct the taxes you owe NJ from your NYS form. One bit of consolation here is that even if you were allowed to pay NJ at a lower tax rate based solely on your wages earned there, your NY tax would then be that much higher, so this really isn't costing you anything more.