Tagging items with descriptive annotations or keywords is a very natural way to compress and highlight information about the properties of the given entity. Over the years several methods have been proposed for extracting a hierarchy between the tags for systems with a "flat", egalitarian organization of the tags, which is very common when the tags correspond to free words given by numerous independent people. Here we present a complete framework for automated tag hierarchy extraction based on tag occurrence statistics. Along with proposing new algorithms, we are also introducing different quality measures enabling the detailed comparison of competing approaches from different aspects. Furthermore, we set up a synthetic, computer generated benchmark providing a versatile tool for testing, with a couple of tunable parameters capable of generating a wide range of test beds. Beside the computer generated input we also use real data in our studies, including a biological example with a pre-defined hierarchy between the tags. The encouraging similarity between the pre-defined and reconstructed hierarchy, as well as the seemingly meaningful hierarchies obtained for other real systems indicate that tag hierarchy extraction is a very promising direction for further research with a great potential for practical applications.