Veteran Pitcher Merrill Kelly Rejects Padres Deal Over California Taxes

Kelly cites high taxes as key factor in choosing $40M Diamondbacks contract over Padres' offer.

Feb. 27, 2026 at 8:08pm

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Veteran pitcher Merrill Kelly declined a three-year contract offer from the San Diego Padres, opting instead for a two-year, $40 million deal with the Arizona Diamondbacks. Kelly cited California's high tax rates as a decisive factor in his decision, revealing that the financial impact of taxes significantly influenced his choice to return to Arizona, where he has strong personal and professional ties.

Why it matters

Kelly's decision highlights the role that state tax policies can play in player contract negotiations, as high-earning athletes seek to maximize their take-home pay. This case also underscores the challenge for teams like the Padres to attract top talent when competing against states with more favorable tax environments.

The details

Kelly, 37, was transparent about the financial impact of California taxes on his earnings, stating: "I don't think it's any secret on how much money you get taken out of your pocket when you go to California." Beyond taxes, Kelly has strong personal and professional roots in Arizona, having attended high school and college in the state, as well as living in the Phoenix area for several years while pitching for the Diamondbacks. While the Padres' three-year guaranteed deal made the decision more difficult, Kelly's team ran the numbers and confirmed that returning to Arizona, where the state income tax rate is around 2.5 percent compared to approximately 13 percent in California, was the better financial choice.

  • In 2025, Kelly pitched 184 innings between the Diamondbacks and the Texas Rangers, finishing with a 12-9 record, a 3.52 ERA, and 167 strikeouts.
  • Baseball Reference projects Kelly to have a 10-7 record, a 3.79 ERA, and 145 strikeouts in 2026, though he disclosed his season start will be delayed due to a back injury.

The players

Merrill Kelly

A 37-year-old veteran 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

“It definitely made the decision to come back here a lot harder.”

— 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

The Padres will need to find alternative options to bolster their starting rotation for the 2026 season after missing out on Merrill Kelly.

The takeaway

This case highlights the significant impact that state tax policies can have on player contract negotiations in professional sports, as high-earning athletes seek to maximize their take-home pay. It also underscores the challenge for teams in high-tax states to attract top talent when competing against teams in more favorable tax environments.