Star Pitcher Spurns Padres, Cites California Tax Burden

Merrill Kelly signs with Diamondbacks, citing lower taxes in Arizona compared to California

Published on Feb. 28, 2026

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The San Diego Padres struck out in their attempt to sign free-agent pitcher Merrill Kelly, who instead opted to stay with the Arizona Diamondbacks. Kelly cited California's high state income tax rate of 13.3% as the deciding factor, noting he would save millions by playing in Arizona which has a 2.5% state tax rate.

Why it matters

This story highlights the ongoing challenge California faces in retaining top talent, both in sports and other industries, due to the state's high tax burden. As the middle class struggles with the rising costs of living, the state's "soak the rich" tax policies are driving away high-earning individuals and businesses, resulting in a "talent drain" that could have long-term economic consequences.

The details

The Padres offered Kelly a better financial deal than the Diamondbacks, but Kelly ultimately chose to stay in Arizona to avoid California's steep state income taxes. Kelly noted "they take too much money out of my pocket" in reference to California's 13.3% tax rate, compared to Arizona's 2.5%. This tax differential can mean millions of dollars in savings for high-earning athletes and other professionals.

  • On February 27, 2026, free-agent pitcher Merrill Kelly signed a two-year, $40 million contract with the Arizona Diamondbacks.

The players

Merrill Kelly

A free-agent pitcher who spurned an offer from the San Diego Padres to instead sign with the Arizona Diamondbacks, citing California's high state income tax rate as the deciding factor.

Gavin Newsom

The Governor of California, whose administration has been criticized for the state's high tax burden that is driving away top talent.

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What they’re saying

“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 (nypost.com)

What’s next

California lawmakers will likely face increased pressure to address the state's high tax rates and cost of living in order to retain businesses and high-earning individuals like Merrill Kelly.

The takeaway

This story underscores the significant impact that state tax policies can have on a region's ability to attract and retain top talent, particularly in industries like professional sports where players have the flexibility to choose where they play. California's high tax burden appears to be driving away valuable economic contributors, highlighting the need for the state to reevaluate its fiscal policies.