Hugs to you and Lizzie. It certainly sounds like the tail needs to go. It is better than trying to save it and risking infection. This sort of injury is called "degloving" which basically is as it sounds, the skin is pulled off like a glove. There could be other damage to muscle and bone as well and it is nice and safe to take the tail off. She will feel much better once it's gone and will cheer up quickly.
You can report the matter to your local police. If you provide details of when, where etc and a description of the dog and it's handlers they can try and find out who it was. It is important that you let them know in case this dog has done it before. In any case it sounds likely to do this again so it's vital that every attempt is made to find it and protect other people and dogs from this sort of behaviour.