Disclaimer, I am 1) talking about the US and 2) talking about the current laws not what I think the laws ought to be.
You have to pay taxes on income.
You also have to pay taxes on gifts.
Say someone gifted you something incredibly valuable, like a house. You have to pay taxes on that gift.
Say you don't have the money to pay taxes on the gift, then what?
Say the gift-giver of the house is also willing to pay your taxes.
That would ALSO count as taxable income which you would need to declare and pay taxes on.
Essentially, it's illegal to give things to people whose cash on hand is below a certain threshold.
That is correct, but because you're not taxed at 100%, there still always exists a number where the recipient pays nothing out of pocket. That's why YouTube giveaways always give like $10k in cash or whatever in addition to the prize.
But, yes, the system is bullshit.