The terminology makes the parents feel special, for sure. And kids are so malleable that terminology plays a role in their self-image, too.
'Gifted' is hard to define. Not in a Kumbaya sort of way, either. It's just way too general to be meaningful.
It ought to be broken down further. Offer second grade-level reading periods for first graders who excel at reading, or advanced high school courses in calculus that offer college credit. Lots of districts take that approach, and it's more palatable.