Merrill Kelly could have pitched for the San Diego Padres in 2026, but what ultimately changed his mind was a tax-related issue, something that in California can be a double-edged sword for many athletes. In the end, he chose to return to the Arizona Diamondbacks.
“Merrill Kelly had a three-year offer from the Padres, but the tax implications were absurd enough that it made more sense to take the D-backs’ two-year deal,” Foul Territory reported on X, citing the pitcher’s recent comments.
It was a three-year proposal, and as Kelly admitted, “It definitely made the decision to come back here a lot harder.” He is now preparing to play the 2026 season in Arizona under a two-year, $40 million deal that also includes a performance-based vesting option for 2028.
How much in taxes was Kelly going to pay?
Had Kelly signed a $40 million contract with the Padres, he would have been subject to California’s top tax bracket of 14.4% (including mental health and SDI surcharges). That would have meant roughly $5.76 million owed to the state. By comparison, Arizona’s flat 2.5% income tax rate would result in about $1 million in state taxes, a difference of nearly $4.8 million in take-home pay.
Kelly acknowledged that while the security of a third guaranteed year was appealing, the “red light” of California’s tax structure made remaining in Arizona for $40 million over two years the more practical decision for both financial and family reasons.
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Other stars, such as Shohei Ohtani and Blake Snell, have structured their contracts with massive deferrals or specific signing bonuses to offset similar tax burdens. Ohtani, for example, deferred $680 million into future years, potentially reducing the immediate impact of California taxes.
