Romney was sworn in as the 70th governor of Massachusetts on January 2, 2003. Upon entering office, Romney faced a projected $3 billion deficit, but a previously enacted $1.3 billion capital gains tax increase and $500 million in unanticipated federal grants decreased the deficit to $1.2 billion.[45] Through a combination of spending cuts, increased fees, and removal of corporate tax loopholes, by 2006 the state had a $700 million surplus and was able to cut taxes.
On April 12, 2006, Romney signed the Massachusetts health reform law which requires nearly all Massachusetts residents to buy health insurance coverage or else face a substantial penalty in the form of an additional income tax assessment. The bill also establishes means-tested state subsidies for people who do not have adequate employer insurance and who make below an income threshold, by using funds previously designated to compensate for the health costs of the uninsured