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.
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.
