Tap water varies greatly even over a small area. New York City, for example, is extremely proud of the quality of its water, which comes from reservoirs upstate. I noticed it was good before I ever found out that it's something they like to boast about.

In DC, however, the chlorine is over the top, especially at times when they're flushing the lines.

I find that most places are somewhere in between these two extremes, even just outside the cities, where different municipalities have their own reservoirs and sources.

As for paper bags, why not just use a reusable bag. In many places in the US, plastic bags are taxed (5¢ or so), with the funds going to clean up rivers. It's led to a major change in behavior.