My grandfather docks his cattledog's tails. He says the reason is because they tend to get caught up in gates, stepped on by farm animals, etc...He says it isn't supposed to be for looks, it is for working dogs
A lot of the ranchers around here also say that cattle and sheep will be distracted and/or alarmed by the herding dog's long, waving tail. I've never quite believed that, since collies have long tails, and they herd, right?