For simple income tax, where you're paid in dollars and hand the government a percentage, that's fine.

But what if you're paying a tax on, say, some equity you were given in a startup?

This can cause huge trouble for people who have illiquid assets, like equity in a private company. You have to pay tax in dollars based on a guess of the value of that equity, even though you can't trade the equity for dollars (it's not liquid). When you eventually can sell the asset, like at an IPO, its assessed value could have decreased and it might be worth even less than the taxes you already had to pay on it.

That's the kind of gift you don't want to receive.

I'm suggesting that, for those who are worried about that risk, the government allow you the option of handing over a percentage of the asset instead. If it ends up being worthless paper, then the government gets nothing, but on the other hand that's also the correct amount for them to get because the tax on $0 should also be $0.

Most likely, the government would choose to (or perhaps by legislation could be compelled to) sell the asset at an IPO, but that's a detail. Perhaps they could also have an agency for managing and directing such assets in the public interest.

No doubt they would be loads of ways to scam this though, setting up supposedly valuable companies to 'pay' a big tax bill, then rinse the company or allow it to fail while diverting profit elsewhere.

It would be an interesting idea to explore and could potentially be a massive boon to risky startups by allowing them to hand out equity more freely as incentives without worrying about the accompanying tax burden.