Not a bug. It's a documented feature mentioned on the description of what making a puppet state does. It's also historically accurate: think conquered people paying for palaces in the capitals of their conquerors, artists moving from conquered cities to core cities, etc.
If that's true, I hope they re-visit this decision. In my opinion, the advantages of puppets (far less unhappiness + no increase in social policies) far outweigh the disadvantages (not being able to choose what they build), especially when going for a cultural victory.
In my opinion, it should be the other way around. Puppets should be a temporary stopgap to allow conquest without destroying happiness. They should be things that you aim to get rid of when you can.
Frankly, while I like the concept of puppets and appreciate they're necessity, I'm not really happy with the way they've been implemented. I think a better solution would be to have the consequence of puppets to be that you only receive 50% of the research/gold/culutre from them instead of not being able to control their production.