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, citing California’s high tax rates as a decisive factor. The decision came during Kelly’s offseason as a free agent evaluating his best long-term options in Major League Baseball.
While the Padres’ offer appeared financially competitive with similar average annual value, Kelly revealed in a recent interview with Foul Territory hosts Scott Braun and A.J. Pierzynski that California’s tax system significantly impacted his choice.
Tax Considerations and Personal Ties Influenced Kelly’s Return to Arizona
Kelly, 37, was transparent about the financial impact of California taxes on his earnings.
“I don’t think it’s any secret on how much money you get taken out of your pocket when you go to California,”
he said. Beyond taxes, Kelly has strong personal and professional roots in Arizona. He attended Desert Mountain High School in Scottsdale and played college baseball at Arizona State University.
The right-hander has lived in the Phoenix area with his family for several years, particularly while pitching for the Diamondbacks over the past seven seasons. Returning to Arizona remained a priority despite other lucrative offers.
Balancing Financials and Family Life Against Team Preferences
Kelly recounted how the Padres’ three-year guaranteed deal made the decision to stay in Arizona more difficult.
“It definitely made the decision to come back here a lot harder,”
he admitted. Yet, he told Pierzynski with a hint of humor that he is
“the first person ever that’s been offered a bunch of money to go live in San Diego and said no.”
Kelly expressed his fondness for San Diego but emphasized the tax burden there was a dealbreaker.
“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,”
he explained.
His team ran calculations and confirmed the numbers favored returning to Arizona, where the state income tax rate is about 2.5 percent, compared to the approximately 13 percent he would face in California.
“We had my numbers guy run the numbers, and it just made more sense to come home,”
Kelly said.
Arizona vs. California: Lifestyle and Tax Implications
Kelly outlined that his options going into the offseason had narrowed primarily to Arizona and San Diego.
“It was between here and San Diego going into the offseason. San Diego was really the only place that, if we did go somewhere, that was probably high on our list if we weren’t in Arizona. It’s like, ‘All right, let’s just hop over and take a short, six-hour drive to San Diego.’”
Despite San Diego’s appeal, Kelly closed with a wry nod to lifestyle preferences, saying,
“But, yeah, the desert is home. I guess we’re not ocean people.”
Padres Miss Out on a Key Starting Pitcher for 2026 Season
The Padres, when reached for comment about Kelly’s statements, declined to discuss contract negotiations. Losing Kelly represents a missed opportunity for the team, which was looking to bolster its starting rotation for the 2026 season.
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 him to have a 10-7 record, a 3.79 ERA, and 145 strikeouts in 2026, though Kelly disclosed his season start will be delayed due to a back injury.
Without Kelly, the Padres’ rotation will rely on pitchers such as Michael King, Joe Musgrove, and Nick Pivetta, leaving questions about the team’s pitching depth. The impact of California’s tax structure looms large in what might have been for both the Padres and Kelly.
Merrill Kelly reveals he had a three-year offer from the Padres on the table.
"It definitely made the decision to come back here a lot harder." pic.twitter.com/Da7oGkO7dv
— Foul Territory (@FoulTerritoryTV) February 26, 2026
