MLB Star Saves Millions by Spurning California Contract for Arizona

Merrill Kelly cites California's high tax burden as key reason for returning to Arizona Diamondbacks

Published on Feb. 28, 2026

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Major League Baseball pitcher Merrill Kelly will pocket nearly $2.5 million more per year over the next two seasons of his $40 million deal by signing with the Arizona Diamondbacks instead of the California-based San Diego Padres. The massive difference in take-home pay is driven primarily by California's high state income tax rate of 13.3%, compared to Arizona's flat 2.5% rate.

Why it matters

This case highlights the significant financial impact that state tax policies can have on professional athletes and other high-income earners. It also underscores the competitive disadvantage that California faces in attracting and retaining top talent due to its high tax burden.

The details

Kelly cited California's tax burden as a key reason he spurned the Padres and returned home to the Diamondbacks. On a $20 million salary, the California state income tax would be around $2.63 million, compared to just $500,000 in Arizona. California also imposes a 1.3% State Disability Insurance tax, which adds another $260,000 in costs. The property tax difference on a $10 million home is around $26,000 per year. Even sales taxes and other costs are significantly higher in California.

  • Kelly signed a two-year, $40 million contract with the Arizona Diamondbacks in February 2026.

The players

Merrill Kelly

A 37-year-old MLB pitcher who signed a $40 million contract with the Arizona Diamondbacks in 2026 after citing California's high tax burden as a key reason for spurning an offer from the San Diego Padres.

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

“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

“We had my numbers guy run the numbers, and it just made more sense to come home.”

— Merrill Kelly

What’s next

Kelly's decision to sign with the Diamondbacks over the Padres due to California's high tax burden could prompt other high-profile athletes to consider the tax implications when choosing where to play.

The takeaway

This case highlights the significant financial incentives for professional athletes and other high-income earners to choose to live and work in states with lower tax burdens, which can put California and other high-tax states at a competitive disadvantage in attracting and retaining top talent.