WASHINGTON (JTA) — As the current round of Israeli-Palestinian peace talks flounder and seek to regain momentum, many are wondering what America can do with its prodigious economic resources to encourage peace and reconciliation between the parties.

For this reason, it may astound many that American taxpayers already are deploying significant dollars in Israel not to pay for peace but to fungibly fund terrorism. Each year, U.S. aid and financial programs fungibly fund terrorist salaries paid by the Palestinian Authority. For the past half decade or so, the level has reached hundreds of millions of dollars annually.

The fact that the Palestinian Authority devotes much of its fiscal resources to rewarding terrorists with generous salaries is an astonishing financial dynamic known to most Israeli leaders, Jewish media editors and Western journalists in Israel. But it is still a shock to most in Congress, who are unaware that U.S. money going to the Palestinian Authority is regularly diverted to a program that systematically rewards terrorists with cash benefits.

Equally astonished are the voters whose money is being used in this fashion. These transactions squarely violate American laws prohibiting U.S. funding from directly or indirectly benefiting terrorists. More than that, such monies grandly incentivize murder and terror against innocent civilians.

Here’s how the system works: When a Palestinian is convicted of an act of terror against the Israeli government or innocent civilians, such as a bombing or a murder, the convicted terrorist automatically receives a generous salary from the Palestinian Authority. The salary is specified by the Palestinian Law of the Prisoner and administered by the P.A.’s Ministry of Prisoner Affairs.

A Palestinian watchdog group, the Prisoners Club, ensures the P.A.’s compliance with the law and pushes for payments as a priority expenditure. This means that even during frequent budget shortfalls and financial crisis, the P.A. pays the terrorists’ salaries first and foremost — before its other fiscal obligations.

The Law of the Prisoner narrowly delineates just who is entitled to receive an official salary. In a recent interview, Ministry of Prisoners spokesman Amr Nasser read aloud the definition: “A detainee is each and every person who is in an Occupation prison based on his or her participation in the resistance to Occupation.” This means crimes against Israel or Israelis. Nasser was careful to explain, “It does not include common-law thieves and burglars. They are not included and are not part of the mandate of the Ministry.”

Under a sliding scale carefully articulated in the Law of the Prisoner, the more heinous the act of terrorism, the longer the prison sentence — and, consequently, the higher the salary. Detention for up to three years fetches a salary of nearly $400 per month. Prisoners incarcerated from three to five years are paid about $560 monthly — a compensation level already higher than that for many ordinary West Bank jobs. Even greater acts of terrorism, punished with sentences between 15 and 20 years, earn almost $2,000 per month.

These are the best salaries in the Palestinian territories. The Arabic word ratib, meaning “salary,” is the official term for the compensation. The law ensures the greatest reward for the most egregious acts of terrorism.

In the Palestinian community, the salaries are no secret — they are publicly hailed in public speeches and special TV reports. From time to time, the salaries are augmented with special additional financial perks. For example, in 2009, a $150-per-prisoner bonus was approved to mark the religious holiday of Eid al-Adha. P.A. President Mahmoud Abbas also directed that an extra $190 “be added to the stipends given to Palestinians affiliated with PLO factions in Israeli prisons this month.”

Reporting on the additional emolument, the Palestinian news service Ma’an explained, “Each PLO-affiliated prisoner [already] receives [a special allocation of] $238 per month, plus an extra $71 if they are married, and an extra $12 for each child. The stipend is paid by the Palestine Liberation Organization (PLO) each month.”

About 6 percent of the Palestinian budget is diverted to prisoner salaries. All the money comes from so-called “donor countries” such as the United States, Great Britain and Denmark. Palestinian officials react with defiance to any foreign governmental effort to end the salaries.

Deputy Minister of Prisoners Affairs Ziyad Abu Ein declared: “If the financial assistance and support to the P.A. are stopped, the [payment of] salaries (Rawatib) and allowances (Mukhassasat) to Palestinian prisoners will not be stopped, whatever the cost may be. The prisoners are our joy. We will sacrifice everything for them and continue to provide for their families.”

Ironically, one Jewish media editor asked this question: If the United States is fungibly funding terrorist salaries with payments to the P.A., is not Israel doing the same when it supplies and transfers cash to the P.A.? The uncomfortable answer is yes. The only difference is Israel does so when it has no choice due to international pressures. That doesn’t change the piercing reality that in America we pay for terrorism abroad and Israel pays for it at home.

Understandably, many argue that the United States and its allies are in a no-win situation. Unless the West continues to fund the Palestinian Authority, Israel has no “partner for peace,” and indeed Jerusalem itself has strongly advocated that the P.A. is its sole partner for peace. Indeed, without foreign funding, the P.A. would collapse.

But by continuing to financially reward the scourge of terrorism, the West ensures a stalemate since terrorism is an institution in the P.A. — judging by the popular prisoner salary law, its priority in P.A. spending, and the enthusiastic social mandate of the Palestinian people who support such terrorist acts and the salaries that arise from them.

There is another view that could win. At the moment, Western aid is catering to and bolstering the basest instincts and impulses of the Palestinian people — the burning rage to commit acts of terrorism against Israelis. However, nearly 100,000 Palestinians come into Israeli territory to work side by side with their Jewish colleagues at jobs across the country. They work under equal conditions, equal pay, enjoy equal company outings, and advance their Palestinian families through peaceful coexistence and normal employment.

If the United States and other Western donor countries abruptly halted all funding of the P.A. — like a slammed door — until the prisoner salary program was eliminated, and conditioned all future funding on joint Arab-Israeli economic and development projects, then the world could give peace a chance. As it is now, peace does not pay and terrorism does.

(Edwin Black is the award-winning author of the international best-seller “IBM and the Holocaust.” This article is drawn from his just-released book, “Financing the Flames: How Tax-Exempt and Public Money Fuel a Culture of Confrontation and Terrorism in Israel.”