Unfortunately, yes.
State tax refunds are considered federal taxable income when the are created by itemizing deductions.
While state tax deductions are often based on a federal deductions, there are many state tax deductions and credits that are different from the federal deductions and credits. By taxing state tax refunds, the IRS is aware you a reporting income from credits/deductions that may not have reduced your previous federal taxes.
For more information on taxable income, follow this link: What is Taxable Income
[Edit 3/2/2019 8:05 AM PST]
