The key part of 'pay taxes with it' is that the debt you owe is denominated in the currency. While convenient to not have to manually sell the crypto first and then pay your taxes in dollars, you still face a lot of risk if the value of your crypto goes down. i.e. if I am going to own $1000 in taxes next year and I put $1000 under my mattress, then I will be able to pay my tax liability regardless of whether or not the dollar crashes in value. If I save that $1000 in bitcoin, I may not have enough to pay off my tax liability with that bitcoin.
Actually, the key part is acceptance, not denomination. There is an oft-cited theory that governments accepting currency as payment of debts incurred via taxation is what gives inherent value to fiat money. Thus, if governments accept BTC to pay for taxes, that should also impart some inherent value to it.
Of course, the theory may well be wrong, as evidenced by e.g. Somali shilling still being in use, even though there's no government backing it in any practical sense for decades.
That's a very recent development, though, and keep in mind that the government behind it controls less than half of the country, and even that control is often nominal and transient (i.e. the local warlord is allied with the central government at that particular point in time). And the shilling kept circulating at relatively stable rates for quite a while even before the bank was revived.
It's not very recent. The shilling hit a low point in 2008 and appreciated by over 3000% from 2012-2014.
According to what I read the "stability" prior to the central bank was a result of an equilibrium between the value of a note and the value of the paper it was printed on. Since there wasn't a central government printing money, it didn't decline further, but tying up $100 in paper to represent $100 seems pretty suboptimal.