I was doing some research on bullying. One of the authors I read drew a distinction between teasing and taunting, which I thought was very useful.
In teasing, the goal is for both people to be laughing. We're human, we do silly things, we can laugh together at them.
In taunting, only one person is laughing. The other person is hurt.
DH and I tease one another all the time. If either one of us feels hurt (which has happened very rarely in nearly 40 years of marriage), the other stops immediately.
FIL may be clueless and think that he's "teasing". Differentiating between "teasing" and "taunting" may help him understand that he is not funny, and that he is hurting a little girl.
Taylor needs to be protected.