Even worse: transactions for outputs containing less than 100 satoshis would be free! So, someone having 1 BTC could pay 0.01 BTC once to split that into 99 satoshi outputs and then create as many free transactions as he want, bloating blockchain size all the time!
To be fair though, this loop hole would be mitigated by the current dust limit of 546 satoshis. However I'm not entirely sure whether the dust limit is wallet dependent or actually part of the protocol consensus?
Good point though! Without a dust limit, given this fee system one would be able to DDoS Bitcoin for
free.