Taylor told the Wolverhampton Express and Star: "Gareth said he wanted Champions League football and it's far from it. I think he should have only left if he was going to a top-four club.
"The potential might be there at City because of the money they have but, ultimately, Villa are in Europe and they're not.
"If he had decided he was going to leave and it's true Liverpool were still interested, then why didn't he go there?"
Taylor, who spent nearly a decade at Villa, part of it alongside Barry, added: "There will be very disgruntled Villa supporters out there, but money talks in football. It's a sideways step.
"It's not very often that a player writes a letter to the fans, but it looked like a bit of a guilt trip to me."
Taylor also feels Villa had little choice but to cash in on one of their prized assets once it became clear he wanted to leave the club.
He said: "Villa were caught between a rock and a hard place. It was a really difficult situation. They made Gareth Barry what they thought was an excellent offer.
"Clearly he didn't want to sign that because he could get more elsewhere, and they would have lost him for nothing in a year."