I'm a little worried that teachers would have no incentive to teach underperforming students. On this scale, a teacher would make less if their students' test scores are lower, but there is only so much he/she can control. It's really difficult to objectively grade teacher performance, and it opens up the system to unnecessary controversy or bureaucracy, depending on the path we choose to take.
Agreed. Schools are target driven enough as it is, but many students have low test scores for a variety of reasons. (and not through lack of interest or effort) I must also say as someone born into a teaching family and aware of many of the pressures that they face, that often the root cause of poor discipline, low motivation and other factors begin at home over which a teacher cannot have any control. Local school districts are better placed to manage this; for example some urban areas may have a higher % of kids who essentially act as primary carers which would effect their attendance and concentration.
