Help,
I lived in PA for 2007 and remain a resident in 2008.
I worked partial year in PA and worked remaining of the year in NY.
While in NY, NY taxes were taken on income earned. Turbo tax showed that NY taxes are calculated on federal income. Why? I am paying taxes on both in PA because I am a resident.
I am confused.

You pay NY tax only on the income you earned there. You should be filing NY's form IT-203 as a non-resident worker. On it you enter both your federal amount of income (which should agree with your federal filing) and the New York portion of your income, which should only be your wages for the time you worked in NY. Check that TurboTax shows the IT-203 with proper amounts in each of those two columns. Then take a look at line 45 of IT-203, which is where you show the percentage of your income that is NY-based -- did TurboTax calculate that correctly? If so then the tax calculation should be correct.