I was just writing a check for local earned income tax today, and noticed that every entry in my register is either for the ski club or taxes. Everything else is paid electronicly by credit card or bill pay. Which in turn, does send out some paper checks, but without me personally having to write and mail them.
As for the remaining holdouts, the ski club gets off the hook easily. We’re a non-profit that can’t really eat 3% in processing fees, nor would our members be likely to make up the $45 difference on a $1500 trip. Our membership is also on the older side, and not everyone is on email, let alone interested in PayPal.
The tax man, though, should be a little more interested in getting his money faster. Both the IRS and the states are pretty good about accepting and encouraging e-filing. The economies of scale aren’t there for smaller local governments, but a savvy business man could make a good case for outsourcing the processing and payment. There’s also another solution for the local income tax in particular: employer withholding. It certainly gets complicated than federal and state, but any modern company selling itself as a leader in information technology *ahem* should be able to handle it 
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