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Top Senate Republicans detailed a much-anticipated plan Tuesday to overhaul the state’s tax system by cutting personal and corporate income taxes in exchange for a broader sales tax applied to everything from haircuts to car repairs.

Senate leader Phil Berger, an Eden Republican, said the forthcoming legislation would trim the personal income tax from the highest 7.75 percent rate to 4.5 percent over three years and cut the corporate income tax from the current 6.9 percent to 6 percent.

The combined local and state sales tax would fall from 6.75 percent to 6.5 percent, but it would apply to hundreds of services currently exempted, including prescription drugs. The food tax would increase from the current 2 percent to the full sales tax rate, more than a three-fold increase.

The plan represents a retreat for Senate Republicans who earlier this year announced intentions to eliminate personal and corporate income taxes, a proposal also floated by Gov. Pat McCrory on the campaign trail. And many questions remain because lawmakers have not filed the exact legislation yet. Full story.

ANOTHER GAMBLING BUST WITH N.C. TIES: On the same day Florida prosecutors busted a gambling operation that snared a company with major North Carolina political ties, an Ohio prosecutor leveled a new indictment against another sweepstakes company with Tar Heel ties.

The March 13 superseding indictment updated charges filed in May against VS2 Worldwide Communications, a company that operated illegal Internet sweepstakes gaming software, according to local news reports. The company's owners, Phillip Cornick of New Jersey and Richard Upchurch of Ramseur, face charges in Ohio of money laundering and engaging in a pattern of corrupt activity.

The two men and their wives contributed more than $45,000 to North Carolina political candidates -- including Gov. Pat McCrory -- with more than half coming after their initial May indictments.

HAGAN ONE OF 11 SENATE DEMOCRATS NOT TO ENDORSE GAY MARRIAGE: North Carolina's Kay Hagan remains opposed to gay marriage, even though three prominent Democrats colleagues recently shifted their stances. The U.S. Supreme Court will hear arguments Tuesday (California's Proposition 8) and Wednesday (the Defense of Marriage Act, or DOMA) about same-sex marriage.

**More on the VS2's campaign contributions and Hagan's stance on gay marriage below in today's Dome Morning Memo. Sends news and tips to dome@newsobserver.com. Thanks for reading.***

Republican state Sen. Phil Berger is elaborating just a little more about his thought process on whether he will challenge Democrat Kay Hagan for her U.S. Senate seat in 2014. Berger, the President Pro Tem, told National Journal that he's "thought about it some."

"I've been approached by a number of folks who've suggested that that's something that I need to consider, or something that they would like for me to consider," Berger told the Journal. If it doesn't sound like much, it isn't. (But then again, Berger offered little when asked the same question earlier this year.)

Berger visited Washington on Monday to speak at an event for the Republican Legislative Campaign Committee. Ray Martin, the political director for the state Senate GOP, told National Journal that he didn't meet with the National Republican Senatorial Committee, a gatekeeper in the GOP nominee process.

But Berger's quotes in the piece sure sounded straight from the national GOP playbook.

Senate leader Phil Berger is circulating an online petition to "Stop Obamacare in North Carolina."

The Eden Republican says the state Senate has already passed a bill and now it's "up to the House and Governor to protect us from:

- The government turning over our health records to the IRS

- Government-forced insurance

- Billions in new taxes on businesses and the people of North Carolina."

There are a few problems with those statements.

Moments after the Council of State approved the Dix deal, a Republican legislative leader pledged to undo it. Senate President Pro Tem Phil Berger, an Eden Republican, said he is evaluating legal options to terminate the lease.

“I am disappointed, but not surprised, that a majority of the Council of State caved into political pressure at the expense of good sense,” he said in a statement issued by his office. "The Senate will begin evaluating legal options to terminate this ill-conceived lease and reclaim this land on behalf of its real owners: the people of North Carolina.”

The state still owns the land, regardless of what Berger suggested. And its unclear if other Republicans would support him. House Speaker Thom Tillis has not yet weighed in on the decision, nor has Gov.-elect Pat McCrory.

UPDATED: A day before the vote on the Dix property, Senate leader Phil Berger sent a letter to the Council of State that suggest the state isn't getting enough money under the terms of the lease deal.

Berger, an Eden Republican, asked legislative staff to analyze the deal to lease the Dorothea Dix property to the city of Raleigh for $500,000 a year with annual increases -- worth $68.5 million. 

A memo from Fiscal Research staffers suggests the actual value of the lease is $22.6 million after factoring in inflation. Berger says the state could get more money if it sold the land, but Democratic Gov. Bev Perdue is proposing leasing the land -- not selling it.

UPDATED: A fundraising invite for House Speaker Thom Tillis sent earlier this month announced a special "appreciation" event for the special interest political committees that lobby at the statehouse. The cost: $4,000, the maximum contribution.

It underlines Republican legislative leaders huge reliance on PACs for campaign money. According to a Democracy North Carolina report released Thursday, GOP leaders Tillis and Phil Berger raised more money from the special interest groups than their Democratic predecessors.

About 36 percent of Tillis' $946,000 raised so far this election cycle came from PACs. For Berger, the Senate leader, PACs contributed one-third of his $974,000, according to the advocacy group, which supports public campaign financing. In their last term in power, Democratic House and Senate leaders raised no more than one-quarter of their money from PACs, the report said.

The governor’s race enters a new phase Saturday when Democrat Walter Dalton and Republican Pat McCrory trade harsh words in the campaign’s first debate. Sponsored by the N.C. Bar Association, the Wilmington forum is an important milepost in the campaign, giving the candidates an opportunity to define their candidacy and separate themselves from their partisan affiliates. So far the race is defined by association.

More political headlines:

--A joint press conference on the budget this week provided a striking moment pointed toward an emerging dynamic between Phil Berger and Thom Tillis, according to many political observers, who saw subtle tears in the GOP fabric compared to a year earlier when Republican lawmakers worked closely together to move North Carolina to the ideological right. 

Gov. Bev Perdue issued her proposed budget Thursday and Republican legislative leaders soon issued statements essentially dismissing the document as a doorstop.

Republicans' problem: Perdue's budget is built on a 3/4-cent sales tax hike, making much of it unusable in their minds. 

Senate leader Phil Berger: "We must break state government’s habit of throwing money at problems and adopt innovative solutions and meaningful reforms.  The cycle of irresponsible taxing, borrowing, and spending must stop.” 

House Speaker Thom Tillis: “Gov. Perdue’s budget proposal is, disappointingly, more of the same failed approach that led to the fiscal mess the Republican legislative majority inherited. ... It is time we budget responsibly without demanding more from the pockets of our citizens.”

The N.C. Coalition for Lobbying and Government Reform hand delivered a letter to Republican legislative leaders late Wednesday urging them to issue advance public agendas for lawmaking sessions.

The letter asks Tillis and Senate President Pro Tem Phil Berger to make public what issues the House and Senate sessions will address five business days before the chambers convene; make available copies of all bills for consideration ahead of the sessions and committee meetings; and hold sessions at regular times.