"That doesn't make sense to me. If taxable income is reduced by the amount of the excess,"
I did not say that taxable income is reduced by the amount of the excess. It would be reduced by some amount less than the amount of the excess due to the pro-rata calculation on Form 8606 (the "worksheet" you seek). The excess is still subject to the 6% excess contribution penalty, but the tax savings on regular distribution can be more, resulting in a reduction of the current-year tax liability. The otherwise taxable portion is just moved to a future year and the excess remains, subject to another 6% penalty each year that the excess remains, so you come out behind in the long run. Ignoring any investment gains on the excess, the taxable amount ends up being the same in the long run as it would have been had the excess contribution not been made, but you pay 6% penalties for the 6% excess contribution.
