I think it's a good idea to have tags for sub-national regions, for questions specific to those regions. For example, bavaria exists and I also created silesia for one of my questions but unfortunately only one quesiton uses this tag right now, I should probably search other related questions and retag them to use this tag.
I'm not against subnational regional tags as such, but to be honest, this particular one doesn't seem very necessary. (1) the number of applicable questions is very low: there's really just a couple. (2) you can basically get the same result just by searching for Schleswig and Holstein. (3) For most of history Shleswig and Holstein were separate duchies and there's not much reason to consider them jointly except for one topic, namely the Schleswig-Holstein Question.
Tags are very helpful in unifying multiple search terms. For example, a WW2 question may only refer to a date, or say "WW2", or "Second World War", or just say "Hitler / Nazi Germany". With the popularity of WW2 questions, the second-world-war tag is very convenient because it helps bring all of these under one search.
For Schleswig-Holstein, it seems rather more convenient to simply search for the region by name. It is almost unavoidable that any such question will mention the area's name. Combined with a low number of questions, the utility of this tag becomes reduced. And in fact the modern German state of Schleswig-Holstein is mostly just Holstein anyway.
The real problem is that questions are limited to only five tags. The example question in the OP had already hit this limit with nazi-germany, world-war-one, hitler, denmark, border-dispute. Yet there's still more applicable tags, including international-relations, versailes, world-war-two and interwar. Suppose one replaces the Denmark tag with a Shleswig-Holstein tag. This actually reduces the utility of the Denmark tag, by removing a question you'd expect to find with it.
It's not just about geographic tags, by the way; dividing temporal and other categorical tags too finely causes the same downside. Instead of doing one search to find all [x] question, one would have to search twice. Of course this isn't always a bad thing. If there's large number of questions, then it may be a net bonus to organisation. But for only a handful of questions, not so much.
Like I said, I'm not actually opposed to regional tags. Scotland for instance is definitely a good tag to use. It's just that given the highly limited real estate for tags (only five), I believe it is more prudent to be judicious.