There can be no way I would think this would work... Hornworm eggs are laid singly directly on the leaves near the TOP of the plant. The young caterpillars feed on the most tender leaves first and will then work down to lower, older sets of leaves as they deplete the most tender stuff. At no time would newspaper placed near/around the trunk of the plant hinder the life cycle of this animal. In fact, they could easily complete the cycle without ever getting near the newspaper.
With absolutely no disrespect intended here, I believe this tip is incorrect information and is actually meant to be a tip to help stop cutworms, as others here have said.