Presently I am living and working in NM. My wife and children are living in MA. My wife does not work. In order to get MA health Insurance I had to set my permanent address in MA for my company. I am now paying state taxes to both states. Should I be paying taxes in the state that I am not living in but my wife is living in.

You should be paying taxes to NM only, as that is your residence and place of work. This assumes that your wife has no income of her own, say from investments. If your company withholds MA taxes you will have to file a MA return next year to get you rmoney back.

Regarding the health insurave issue - do you mean that your provider won't let your wife choose a primary car physician for your wife in MA if your address is MN? I had a similar problem when I worked in TX while my wife and kids were in NJ - my company had Aetna health insurance, and for whatever reason the division of Aetna that covered the east coast was different than the division for the midwest, and consequently none of the NJ doctors or hospitals were available to us. But I was able to work through our HR department to get Aetna to over-ride their system.

While I tend to agree with ebaines that your principal tax liability is with NM, the great commonwealth of Massachusetts probably considers you to be a permanent resident of their state because that is where your family lives and because you probably filed jointly with your wife.

Of course, because you actually LIVE in NM, New Mexico will also consider you to be a resident of their great state.

You CAN get a credit for the taxes paid to NM on your MA tax return, so at least you should not be double-taxed.

If you are resident of MA, you must file MA tax return. Generally, you are a resident of a state if your visit outside the state is temporary or transitory. Check at MA web site for residency rules.

You must file NM tax return and, if you are resident of MA, MA tax return. On MA tax return claim credit for taxes paid to NM.