How am I going to make it to where only if the blocks touch it gosubs @tag? When they have the same X coordinate or the same Y coordinate they tag, even though they don't touch.

Try inserting "TAG=0" between line 35 and 36.

Or write "IF X2==X && Y2==Y THEN GOSUB @TAG" instead of "IF TAG>=2 THEN GOSUB @TAG" in line 38. In this case, variable TAG won't be used any more.