The danger is that having this focus in school means that kids get neglected once they pass that threshold. When a school is graded by "% of kids who are at-level" there is no incentive for the best ones. In my opinion this is why these kids need to be pulled into separate schools where the ambitions are higher than the minimum threshold.
I see it with kids who are several grades ahead in math and reading, and their only options are skipping grades (and being socially awkward) or being bored out of their mind in class.
This isn't permanent tracking, but it's giving the option to excel for those who are ready and willing.