Missing taxable_roth_conversions in State Gross Income / AGI Definitions (AL, AR, NJ) #9352

When taxable_roth_conversions was added as a distinct variable from taxable_ira_distributions, it was added to the federal gross income sources (gov.irs.gross_income.sources), but was omitted from several state gross income / AGI definitions that explicitly list income components (AL, AR, NJ).

This causes state models to treat Roth conversions as non-taxable at the state level. In Alabama (which allows a deduction for federal income taxes paid), this omission creates a negative state marginal tax rate as Roth conversions rise, because federal tax increases while Alabama gross income remains unchanged.

Affected Files

1. Alabama (AL):
   • policyengine_us/parameters/gov/states/al/tax/income/agi/gross_income_sources.yaml
2. Arkansas (AR):
   • policyengine_us/parameters/gov/states/ar/tax/income/gross_income/sources/individual.yaml
   • policyengine_us/parameters/gov/states/ar/tax/income/gross_income/sources/joint.yaml
3. New Jersey (NJ):
   • policyengine_us/parameters/gov/states/nj/tax/income/gross_income/non_negative_sources.yaml

Expected vs. Actual Behavior

• Expected Behavior:

  • In AL, AR, and NJ, traditional IRA to Roth conversions are taxable income at the state level (just like taxable_ira_distributions) under Ala. Code § 40-18-14, Ark. Code § 26-51-404, and N.J.S. 54A:5-1 (Line 20a).
  • State AGI / gross income should increase when taxable_roth_conversions increases.

• Actual Behavior:

  • Alabama (AL): al_agi stays flat at $100k when Roth conversions increase from $0 to $50k, while al_federal_income_tax_deduction increases. This reduces al_taxable_income and causes state income tax to decrease, resulting in a negative marginal tax rate (-0.75% to -1.35%).
  • Arkansas (AR) & New Jersey (NJ): State tax on Roth conversions is calculated as $0 regardless of conversion amount.

Reproduction Scenario (Alabama Negative Marginal Rate)

from policyengine_us import Simulation

sit_0 = {
    'people': {'you': {'age': {2026: 45}, 'long_term_capital_gains': {2026: 100000}, 'taxable_roth_conversions': {2026: 0}}},
    'tax_units': {'tax_unit': {'members': ['you']}},
    'households': {'household': {'members': ['you'], 'state_code': {2026: 'AL'}}}
}
sit_1 = {
    'people': {'you': {'age': {2026: 45}, 'long_term_capital_gains': {2026: 100000}, 'taxable_roth_conversions': {2026: 10000}}},
    'tax_units': {'tax_unit': {'members': ['you']}},
    'households': {'household': {'members': ['you'], 'state_code': {2026: 'AL'}}}
}

sim0 = Simulation(situation=sit_0)
sim1 = Simulation(situation=sit_1)

print("Roth = $0 AL Tax:", sim0.calculate('al_income_tax', 2026)[0])       # 4501.63
print("Roth = $10k AL Tax:", sim1.calculate('al_income_tax', 2026)[0])     # 4426.63 (-$75 tax on +$10k income!)

Proposed Solution

Add taxable_roth_conversions to the parameter YAML lists for:

gov.states.al.tax.income.agi.gross_income_sources
gov.states.ar.tax.income.gross_income.sources.individual
gov.states.ar.tax.income.gross_income.sources.joint
gov.states.nj.tax.income.gross_income.non_negative_sources