Are you sure this is View > As Tags? That view does not have a folder sidebar or icon view.
However, I am able to reproduce what you describe in other views – for example, View > As Split. Select a group (“folder”) in that view - the icons are sorted either a-z or z-a. Open the group in a separate window by control-clicking the group’s name and choosing “Open”. You will see a document list. Click the “Name” column to reverse the sort order. Close the separate window. In the original View > As Split window if you click away from the group and back again you will now see the icons sorted in the reverse order that they were originally.
I think this is working as intended, since in any view you can re-sort the document list by clicking the column header and that new sort order should persist in other views if you have activated Preferences > General > Interface > Retain View.
I always work in Split View and never thought to try Three Panes, which has column headers to click on for sorting. And had no idea that opening the Tags Smart Folder in a separate window would allow me to resort.
Also thanks for the Preferences tip; it is now checked.