The government can (and typically does) force you to pay those taxes in dollars, not Bitcoin.
El Salvador broke that mold.
Money cannot be infinite unless resources are infinite (and I think we are still a long way from that), otherwise the value will go towards 0 measured in its ability to be traded for goods and services.
It can be if one resource is infinite. As noted, every single USD In the world could be used to purchase digital downloads of songs, tens of trillions of them, use up every USD and then start with the EURO. We could go through the entire momentary system and never run out of digital downloads as long as the bandwidth was there.
Of course, this is taking to the extreme but it shows how all money could be focused in one area to obliterate the existing supply.
Finally, the growth rate of processing power is far exceeding the printing of the global money supply. This is eradicating more of what we spend money on in the physical form. Consider how much money was spent in the early 1980s on pictures, between the film, development, and mailing. Now, we take 3 trillion pictures a year, at near zero cost per picture.
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El Salvador's money was already worthless and Bitcoin is valuable in large part because the supply is NOT infinite.
I understand what you are saying but not everything can be digitized. Most of the important things cannot be. You want clothes to wear, food to eat, a car to drive, a house to live in, a pet cat (though I suppose you could have a digital one of those if you wanted), etc. then you are not going to just download it. Obviously I am not going to trade my house for a digital song download. Hence whatever digital currency you are using to pay for a song download, you would need a whole lot more of it to pay for a house...works the same as dollars that way. The benefit of a currency vs. the barter system is that you can use it to pay for everything instead of having to trade a pig for a goat so that you can trade the goat for the wood for the fence you need...or whatever. If you can have infinite currency to download infinite songs, that's just a away of saying they have no value in terms of trade for anything else and why are you even bothering with a currency at that point?
Every single dollar could be used to download music but it won't be so I don't understand how that is relevant. One could purchase grains of sand for a dollar each too but nobody is going to do that either. At the end of the day, whether we are talking about fiat or crypto, the more of it that exists, the less that 1 unit of them are worth. You can't invent value simply by printing/making more. Otherwise we could just print millions of dollars for everyone and all be infinitely prosperous. Most crypto is valuable because of the utility of their respective blockchains (and speculation of course). A few are used exclusively as currency or a store of value but too much inflation is counterproductive there. Crypto is still a relatively new invention and the demand is still growing at an astronomical rate. However, that rate of growth won't continue forever. We don't need infinite currency (it can be subdivided anyway). We need useful currency.
Sure digitization has basically made it possible for unlimited media and certain kinds of services. This just means that those things are much, much cheaper (even nearly free). But what about everything else?