Other roundtable participants sounded off on "unrestrained, unbridled government spending" and a battle with Maryland Department of the Environment as a business tried to expand.
Ehrlich called MDE the second-most-broken state agency, behind the Department of Labor, Licensing and Regulation.
Dick Seibert, the owner of Knob Hall Winery in Clear Spring, said new stormwater management regulations greatly increase the cost of development.
"It's people that have no idea what that does to your project," said Del. Andrew A. Serafini, R-Washington.
As he runs again for governor, Ehrlich often uses Maryland's reputation among businesses as a platform issue. He said the state's stature rose during his four-year term and dropped again under O'Malley.
O'Malley, though, champions Maryland as a state keeping and adding jobs better than most during a tough economy.
At his campaign website, O'Malley points to a U.S. Chamber of Commerce and National Chamber Foundation study that says Maryland is one of the top states for job creation.
O'Malley is facing Democrats J.P. Cusick and Ralph Jaffe in a Sept. 14 primary.
Ehrlich's Republican opponent in the primary is Brian Murphy.
The general election is Nov. 2.
Ehrlich talked Tuesday about what he thinks is wrong with Annapolis, then asked the 40 or so business people, elected officials, candidates and nonprofit organization leaders gathered at Hager Hall to introduce themselves. A few in the group said they are Democrats.
Connie Leach, who owns Paper Plus The Party Store on Dual Highway with her husband, urged people to take part in the national 3/50 Project, in which shoppers pledge to spend $50 a month at local businesses.
Ron Vitkun invited legislators to spend a day watching a business owner make tough decisions, such as when to lay people off.
Washington County Commissioners President John F. Barr said his company, Ellsworth Electric, operates in Maryland and Pennsylvania. Some days, he said, he's tempted to move the whole business to Pennsylvania.
Bill Hetzer of C. William Hetzer Inc., a construction company with around 250 to 300 employees, broke the audience up with his vent about bureaucracy in state and federal government.
If the average person knew how much bureaucracy increases the cost of business, he said, "they would hang all of you politicians."