The priority isn't about punishing you, or about your feelings or career at all. It's about the science.
If you cite something that turns out to be garbage, I'd imagine the procedure would be to remove the citation and to remove anything in the paper that depends on it, and to resubmit. If your paper falls apart without it, then it should be binned.
I can't think of a single paper that would fall apart to any of its cited papers being retracted. What field of science operates that way?
Science papers are novel contributions of data, and sometimes of purely computational methods. A data paper will stand on its own. A method paper will usually (or at least should) operate across multiple data sets to compare performance, or if only on a single dataset it's gonna to be a very well tested dataset.
If MNist turns out to be retracted, would we have to remove all the papers that used it over their years? That's about as deep as a citation can get into being fundamental and integral to a paper. And even in that case nearly any paper operating in that dataset will also be using other datasets. Sure, ignore a paper that only evaluates on a single retracted dataset, but why even bother retracting, as the paper would be ignored anyway, because what significant paper would use a single benchmark?
But 99.9% of citations have less bearing on a paper than being a fundamental dataset used to evaluate the claims in the paper. And those citations are inherently well-tested work product already.
So if people actually care about science, they would never even propose such a scheme. They would bother to at least understand what a citation was first.
If you cite something that turns out to be garbage, I'd imagine the procedure would be to remove the citation and to remove anything in the paper that depends on it, and to resubmit. If your paper falls apart without it, then it should be binned.