They don't have the most damage output, fwiw. After all, that statement lacks any context for *anyone* to be highest. At what range? With how much forewarning? With how many encounters preceding this one? At what AC? Vs how many combatants, and what is their relative positioning?
If you are starting from 300m away, a Paladin won't be tops at all, because they're slow and pretty much need to be in melee range. Ranged specialists may well finish the fight before they deal a single point of damage. If you're facing a cluster of 9 enemies all adjacent to each other, they're not going to be tops at all, your hasted 3x/round Fireball slinging Sorc will be. If you have unlimited setup time, a Barrelmancer will absolutely destroy them in damage output. And so forth.
They have a ton of upsides, Boz listed quite a few of them, and you're correct in that their high AC and especially auras make them quite popular. As far as filling the "tank" role, they do that very well, and they bring more utility and flexibility and fun burst damage than a straight fighter. I love paladin and am playing one in a single player campaign. But the only context in which they're top damage output is if you're talking about starting at melee range vs a single target dummy and having say 4 rounds to blast out as much damage to it as you can, and even then that's quite debatable.
