When a colour tag is used, the appearance of the title area is different compared to non-tagged items, not just in the colouration, but in how the right edge ends up as a little triangle of colour when the item is selected (vs there being no diagonal colour slice for non-colour-tagged items).
My two cents:
- the "triangle" is visually jarring
- the "triangle" being the only part left as coloured (when selected) somewhat defeats the colouring scheme (I personally find it difficult to distinguish the small patch of colour)
Just use dark/light versions of the colours (for unselected/selected states). If the selected state being a lighter colour is not enough, perhaps use some other indicator, eg outline the box, or put a * (or dot) in front of the name, or (least preferred) use the trinagle at the right idea but just have the triangle in the white-ish colour and the rest in the colour tag colour.
"Not tagged" should be replaced by "Default colour" - there is no good reason to have a screen full of colour tags with non-tagged items displayed a different way.