I am 60. I average 12,000+ steps per day. My VO2 DECREASED to 31. Shouldn't it INCREASE?
I think you will get better help if you ask in the forum for that particular device you are using since the VO2 max calculations are performed on the device.
I can't see anything in what you write that tells us how your VO2 max should act. What device are you using and have your performance improved?
To my understanding, the VO2max figure is only calculated based on regular running activity (not even trailrunning) and cycling if using a power meter. Estimating VO2max needs a sufficiently high heart rate (not walking) and an activity type where exertion can be estimated from speed (running) or power measurement (cycling with power meter).
So if you just take 12000+ steps per day using either the walking activity or 24/7 activity tracking, there's nothing to base the VO2max estimate on. And that's the same with all devices, not just Garmin. (TomTom Adventurer I previously had tried to estimate VO2max also from trailrunning, failing a lot because if different terrain etc.).
Estimating VO2max needs a sufficiently high heart rate
Yes, that is correct. Gamin uses Firstbeat's technology for the VO₂Max calulation, so if you want to know exactly how it works, have a look at this document from Firstbeat: Automated Fitness Level (VO2max) Estimation with Heart Rate and Speed Data or at the simplified explanation on their website: VO2max Fitness Level. And Garmin has some details on their website too: What is the VO2 Max. Estimate Feature on My Garmin Device?
BTW, I'm quite positively surprised how consistent the VO2max estimate is across devices. I just recently switched from TomTom Adventurer to Garmin Fenix 5 Plus, and the initial VO2max estimate my Garmin gave me after a couple of runs was exactly the same as the last estimate my TomTom gave me. And when I first got my TomTom, I had just recently had VO2max estimate made by Firstbeat's "professional" fitness test (paid by my employer) using a computer controlled stationary bike. That test exactly agreed with TomTom's estimate.