There are two basic ways to judge student performance. The first is based on student grades. The second is based on standardized test scores.
Let's first look at merit pay based on student grades. Teachers do not all grade the same way. Some use points, others use percentages. Some use total sums of points, others use averages. Some weight their grades, perhaps making tests worth 80% and homework 20%, while others may weigh tests and homework equally. Different teachers use different grading scales: to get an "A" in one class, a student might need 95%; in another class only 88% may be needed for that same "A." Grading in math class, which may consist mostly of assignments and tests, may be done very differently from that in a social studies class where projects, presentations, and research may be the main focus. So, is it fair to judge a teacher by the grades of his or her students. Because grading is so subjective, I think it isn't fair. There is also the possibility of a teacher suddenly giving out a lot more "A"s and "B"s to students or watering down the curriculum so that more students earn higher grades. Either way, it would not be fair to give merit pay based on these grades.
Second, lets take a look at merit pay based on standardized test scores. It would appear that this would make merit pay more fair than basing it on grades. But is it really? I think back to when I started teaching. At that time, teachers with less seniority were given lower ability classes. For instance, the first many years I taught, I usually had a schedule of 5 General Math classes and one PreAlgebra. Teachers with more seniority were given (had "earned") the higher level classes of Algebra 2, PreCalculus, Calculus, Statistics, and these were full of "honors" students. Eventually, after many years, I too, had "earned" my right to teach some of these higher level courses.
In those first years, my students were rarely proficient on standardized tests. Many scored in the 1-15 percentile rank and most scored below the 40th percentile needed to be considered proficient. If my pay had been based on the scores of these students, I would not have been paid much. Even though many of these students had moved up two or three grade levels during the school year, they were still considered at risk. These were ninth grade students who started out doing 4th grade work and ended the year working at a 7th grade level. Even though they had moved up three grade levels, they were still two grades levels below where they should be. And on standardized tests, they still performed poorly. So, would it be fair to give merit pay to the teachers of proficient students (many who are high-achieving and in top level courses) and not to the teachers of less capable students who don't reach that magic number considered proficient? I think not.
I agree that almost every student has the ability to learn, but not all students achieve at the same levels, at the same times. In my opinion, it would not be appropriate to give teachers merit pay based on the performance of their students. If merit pay is given, it must be done based on some other criteria than teacher evaluations, student grades, or student scores on standardized tests.