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Hi,The tape input is actually part of a tape loop with recording/playback facilities. This can be configured differently in preamp sections, but in general is the reason you're overloading that input.
Well, by decreasing the output from your phono section, you would only reduce distortion if your present levels are overloading or saturating the high level input on your amp. I think this is unlikely, but not impossible. Do you need less gain on the phono than other sources like CD? Also, having less output from phono will decrease the S/N ratio and make it more likely that the red lights will flash because the signal is too low and the amp is running out of headroom.