I self host a lot, but I host a lot on cheap VPS’s, mostly, in addition to the few services on local hardware.
However, these also don’t take into account the amount of time and money to maintain these networks and equipment. Residential electricity isn’t cheap; internet access isn’t cheap, especially if you have to get business class Internet to get upload speeds over 10 or 15 mbps or to avoid TOS breaches of running what they consider commercial services even if it’s just for you, mostly because of of cable company monopolies; cooling the hardware, especially if you live in a hotter climate, isn’t cheap; and maintaining the hardware and OS, upgrades, offsite backups for disaster recovery, and all of the other costs. For me, VPS’s work, but for others maintaining the OS and software is too much time to put in. And just figuring out what software to host and then how to set it up and properly secure it takes a ton of time.
But it hasn’t always been free to file electronically. The government made it required for them to offer free versions for simple returns, but that was recent.
Also, access to the Internet isn’t universal. You’d be surprised how much of the US doesn’t have affordable Internet and a fair number don’t have Internet available at all, or limited to just dialup which is not very useful. And a lot of apps don’t work right on phone browsers, especially older phones, so then you need a desktop or laptop which a lot of people don’t have. Some have access in libraries, but a lot don’t or traveling to a library is a burden. And lots of other reasons that internet isn’t a given for a large portion of households. So paper is still not just necessary, but the easiest way.