With the start of Spring Training, and the regular season just around the corner, Merrill Kelly’s decision to sign with the Arizona Diamondbacks instead of the San Diego Padres is more than a baseball story; it’s a case study in how tax policy shapes real‑world choices. In a recent interview, Kelly didn’t mince words about the California: “They take too much money out of my pocket, man. The taxes over there are a different level.”
California politicians and commentators often insist they can legislate without consequence, but Merrill Kelly exposed the truth: incentives matter, and California’s tax code is driving people, including elite athletes, away. Kelly’s choice mirrors a larger trend. We recently highlighted how California has experienced significant outward migration in recent years, driven by high taxes, high costs, and regulatory burdens that make it harder for families and businesses to stay. To put it bluntly, when a state makes it expensive to live or work there, people leave. Like the high-profile tech entrepreneurs fleeing the state, professional athletes like Kelly are simply another visible example because their salaries make the math impossible to ignore.
The Math Behind Kelly’s Decision
In December, Kelly signed a two-year contract with the Diamondbacks worth $40 million, meaning $20 million per season. On a $20 million salary, California’s top marginal income tax rate of 13.3 percent would cost Kelly more than $2.6 million per year. In Arizona, with a flat 2.5 percent tax rate, the taxes would only amount to about $500,000. That’s a more than $2 million difference annually on income taxes alone. California’s additional taxes (1.3 percent State Disability Insurance tax and higher effective property tax rates, among others) would grow the disparity by several hundred thousand dollars more. In total, Merrill Kelly will end up keeping almost $2.5 million more per season just by signing with the Diamondbacks instead of the Padres. This comes as no surprise given that the Tax Foundation ranks California as 48 on its state tax competitiveness index, 34 spots lower than Arizona.
Arizona isn’t just a low‑tax state. It’s a state where baseball is a major economic driver and players like Kelly contribute to a broader sector that benefits residents, businesses, and local governments. The Cactus League is one of Arizona’s most important annual economic events. The Common Sense Institute projects that out‑of‑state visitors will spend between $210 million and $590 million during the current five‑week spring training season, generating $210 million to $953 million in GDP and supporting 668 to 9,697 jobs statewide, with more than 1 million fans across ten stadiums. It’s a major seasonal economic boost for restaurants, hotels, retailers, and transportation providers across the Valley.
Additionally, when a team like the Diamondbacks remains competitive and makes a deep postseason run, or even makes it to the World Series like the Diamondbacks did in 2023, the economic impact multiplies. Hosting World Series games drives major tourism spending, national media exposure, and local business activity, bringing surges in hotel occupancy, restaurant revenue, and regional visibility that can’t be replicated by ordinary tourism campaigns. In other words, keeping good players like Merrill Kelly isn’t just good for the Diamondbacks. It can be a boost for Arizona’s economy.
On the other hand, the Padres have never won a World Series and haven’t played in one in 28 years. It will remain a challenge when every contract they offer comes with a built‑in penalty: California’s tax code. California doesn’t just discourage people from moving there. It punishes them for showing up. States that let people keep more of what they earn will attract talent. And states that don’t will lose talent, whether professional athletes or entrepreneurs. When you tax success at the highest rate in the country, like California, people will choose to succeed somewhere else.