State tax rate on IRA -> Roth Conversion

[dave_a]

Hi, while doing my 2023 taxes in TurboTax today I added a 1099-R for a roughly $10,000 conversion from IRA to Roth. My Federal tax increased by approx $2,500 which makes sense to me as ~25% of $10,000. However, my NY State tax refund also dropped by roughly the same amount ($2,500). Which means this $10k conversion will effectively cost me $5,000 ($2,500 extra to both Federal and NY state). This seems wrong - my NY state tax rate should be about 7%. There is no 10% early withdrawal penalty on an IRA to Roth conversion even when under age 59 1/2. Can anyone explain this state calculation please? Thanks.