Please forgive me if this has been answered, but is there a paper or source I could cite for the claim that CPS HHINCOME is better for national and USA (ACS) is better for state-level household income data? If the claim is false, I’d like to know that also. Thank you.

Which dataset is better depends on your specific analysis. You may be interested in Census Bureau resources outlining differences between ACS and CPS and which dataset to use at different geographic levels to be useful in determining which dataset is more appropriate.