I think the overview of tags is way better on the page for an existing contact (in the "Tags" tab) than when you are creating a new contact...
existing contact page - http://i.gyazo.com/51d98b18a2f579291a63a667c767bf2a.png
new contact page - http://i.gyazo.com/51d98b18a2f579291a63a667c767bf2a.png
So let's use that style for the new/edit contact form.
This issue also includes completing implementation on the 'Selectable' feature for tags. Users may not want tags that are "parents" of a category or hierarchy to be chosen. Unchecking [ ] Selectable in when adding or editing a tag prevents them from being assigned to an object.