Estate tax relief seems on track in Annapolis

"We think it affects decisions about where people choose to live," said Feinroth, adding that the tax could motivate some Marylanders to move across the Potomac to Virginia, which has no estate tax.

Busch, who represents Anne Arundel County, is skeptical.

"I don't see any mass exodus. I've never given any credibility to that theory," he said.

The speaker said the reason he supports the change is that Maryland's estate tax is "out of sync with the rest of the country."

"You'd like to think your entire tax code is competitive," Busch said.

Maryland is one of 19 states and the District of Columbia that have an estate tax. Eight of them have higher exemption levels. Only one state, Washington, has a higher top rate.

Maryland is one of only two states that have both an estate tax and an inheritance tax, which applies to bequests outside the family.

Deschenaux said there is no double taxation, because those who pay the inheritance tax get a credit against the estate tax. But it is a distinction that colored Maryland — along with New Jersey — red on a map with a recent Wall Street Journal article called "States You Shouldn't Be Caught Dead In."

Daniel E. Hoff, president-elect of the Carroll County Association of Realtors, said Maryland's estate tax doesn't affect the typical real estate transaction, but it does hurt the overall business climate.

"Do I think it's having a negative drag on our local economy and business environment? Yes, I do," he said.

If Hoff were starting a small business in his area, he said, he'd likely choose to locate it in Pennsylvania, another state with no estate tax.

Benjamin Orr, executive director of the Maryland Center on Economic Policy, said that if he could allocate $90 million a year from the state's revenues for tax relief, reducing the estate tax wouldn't be his choice.

Orr said affluent Marylanders already have estate-planning tools they can use to reduce their tax liability. He would rather see an increase in the state's earned income tax credit, which benefits the working poor.

"The burden of taxation already falls disproportionately on those less able to pay," he said. "If you're able to leave an estate worth $1 million to your heirs, you're not in too terrible a position."

michael.dresser@baltsun.com