Tags always worked. They work today, they have been working since the beginning. I have no problem with indexing tags per-se, there are indexing issues with google all around, tags, posts, pages, they don’t index as they did.
1. they work as internal links: when adding a tag to a post with links, some of the SEO juice flows to the tag, and then spreads allthroughout the rest of the posts within the tag
2. if they have proper titles and descriptions are a great asset
3. they work as navigation, making posts within the same topic easier to find
I know they work, maybe they don’t really matter on smaller sites, for example, but I can tell you they have been a huge Evrika for me in the past months.
People don’t use then because they don’t think they need them, and they might be right. Or because they’re lazy. For me they work big time.