I live in NY and work in PA and on my pay stub I don't pay the local school tax in PA anymore but I have to pay PA state tax with "i should get back at the end of the year". So why pay it at all if I get it back? And I don't pay any new tax to NY state should I have to pay NY state tax too?

1. On your PA tax return, you will report the income earned while in PA.
2. On your NY tax return, you will report your worldwide income. You will also claim credit for taxes paid to PA.

You will NOT get the PA tax back from PA.

What will happen is you will claim a credit for the PA taxes paid on your NY state income tax return.