© The Author(s), under exclusive license to Springer Nature Switzerland AG 2025.This paper examines the role of tobacco taxation in Spain, focusing on its effectiveness in reducing smoking, generating fiscal revenue, and promoting health equity within the framework of health economics and the Laffer Curve. By reviewing international studies and employing panel data econometrics across Spain’s 48 provinces, we analyze the optimal tax rates that maximize revenue without excessively diminishing demand. Key findings highlight that while tobacco taxes are generally effective in reducing consumption, tax disparities between products and price elasticity variations—particularly due to substitution towards roll-your-own (RYO) tobacco—limit this impact. Demographic variables, including the aging population and socio-economic status, also influence consumption and tax sensitivity. Results suggest that Spain’s current tax rates may fall short of the revenue-maximizing point, indicating potential fiscal losses. This study advocates for a balanced approach to tobacco taxation, integrating both specific and ad valorem taxes and adjusting them to inflation, while harmonizing tax rates across products. These reforms could enhance Spain’s public health outcomes and fiscal sustainability, offering insights for optimizing tobacco tax policy in an aging population.