This is the behavior I expect. I don't think I'm alone in this.
But it would be a huge, huge problem if someone could tag me in a photo and share it to some circles that didn't include me. Fake-tagging people or tagging people in embarrassing photos is a major problem on FB, and the privacy issue here goes two ways: the person you tagged also has their own privacy concerns. What if you tagged an embarrassing photo of me, shared it with a circle of hundreds of co-workers (that you excluded me from), and then not only do I not know the picture is out there, but co-workers can see it by visiting my profile and looking at pictures tagged of me? That would be orders of magnitude worse than the status quo.
I'm trying to think of how you design a system that respects both my concerns and those of the OP, and I can't come up with anything that would be intuitive. (Suppose that you could tag an album full of people and keep it private to yourself, but sharing it with a family circle caused it to also be shared with everyone you tagged? That really would break user expectations). I think the current implementation might be the best one, perhaps with more of a warning in the UI that tagging shares with the person tagged. In essence this is not a privacy complaint, it's a feature request: people want to use tags for a different purpose (organizing private albums) than they are designed for.