Hey, The Google Panda Update says that it will remove low quality search results. The Wordpress Tag Pages are also Low Quality pages. So The Question is What changes to be done in SEO to be un affected by panda update. And How To Avoid tag Pages From Appearing in Search Results ?
Tag helps in search within the wordpress and through tag cloud your blog post get indexed regularly. That's the only advantage. It has least SEO effect as a tag can help in video and image optimization not for content based site. So, it's safe if you are using relevant tags
Tag pages are pretty widespread so I doubt Google would penalize sites that have them, but you have to be careful how you implement them. You do not want to have the tags pages have too many links or it could appear as keyword stuffing. Below is a recent video on this subject from Matt Cutts of Google. http://www.youtube.com/watch?v=bYPX_ZmhLqg
I don"t think using relevant keywords can be called keyword stuffing.but use about 6-7 relevant keywords to Tag your post...