Veteran Pitcher Merrill Kelly Rejected Padres' Lucrative Offer Due to California Taxes

Kelly chose to re-sign with the Diamondbacks, citing California's high tax rates as the deciding factor.

Feb. 27, 2026 at 7:34pm

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Veteran MLB pitcher Merrill Kelly revealed that he turned down a lucrative three-year contract offer from the San Diego Padres in favor of re-signing with the Arizona Diamondbacks, citing California's high state income tax rates as the primary reason for his decision.

Why it matters

This story highlights how tax policies can play a significant role in player contract negotiations and roster decisions in professional sports. California's high tax rates appear to have cost the Padres the chance to add an experienced and productive starting pitcher to their rotation.

The details

Kelly said the Padres offered him a three-year, fully guaranteed deal that was similar in value to the two-year, $40 million contract he ultimately signed with the Diamondbacks. However, after running the numbers, Kelly determined that the tax burden in California would make the Padres' offer less financially appealing than staying in Arizona, where the state income tax rate is significantly lower.

  • Merrill Kelly became a free agent during the 2025-26 MLB offseason.

The players

Merrill Kelly

A 37-year-old right-handed starting pitcher who has played for the Arizona Diamondbacks for the past seven seasons.

San Diego Padres

A Major League Baseball team based in San Diego, California.

Arizona Diamondbacks

A Major League Baseball team based in Phoenix, Arizona.

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What they’re saying

“I don't think it's any secret on how much money you get taken out of your pocket when you go to California.”

— Merrill Kelly

“I love San Diego. It's just, like I said, they take too much money out of my pocket, man. The taxes over there are a different level.”

— Merrill Kelly

What’s next

Kelly confirmed that the start of his 2026 season will be delayed due to a back injury, so his performance and health will be closely watched as he begins his new contract with the Diamondbacks.

The takeaway

This story highlights how tax policies can have a significant impact on player contract decisions in professional sports, with high-income earners like MLB players being particularly sensitive to state income tax rates. It also underscores the challenges that teams in high-tax states like California may face in attracting and retaining top talent.