Like the title says, when I create a tag, it should set the color to an unused color. I think it should try to set the first 3 to primary colors, second 3 to secondary colors, then use hues similar to the 3 primary colors, and then hues similar to the 3 secondary colors, then tries hues slightly different from those, etc, so that you end up with the most varied assortment of colors for easiest distinction, but limitless options!

Extra credit would be to allow people that already have 25+ tags to randomize all tag colors, or set to a color scheme, etc.