If you re like me, your favorite part of America s yearly budget document isn t the long preamble that usually blames problems on factors beyond the current administration s control ( Inheriting a Legacy of Misplaced Priorities ) or even the tables that detail how much various government branches will spend. It s a table tucked in near the end of the sleepy Analytical Perspectives section. In that table, the government (as required by a 1974 law) lists something called tax expenditures.

A tax expenditure is a miracle of politics. To spend money under normal conditions, Congress must pass a spending bill and the cost of the program must be listed on the national ledger, to be compared with tax receipts each year. But no one in Congress wants to be called a tax-and-spend lawmaker. Tax expenditures not only bypass the ledger, they also sound to voters like the opposite of spending programs. They sound like savings programs.

For example, the Hope Credit provides cash for college students. We could accomplish the same thing by collecting money in taxes and paying it to college students or their families through a spending bill. But that s taxing and spending. So instead, we give students and their families tax relief in the form of the credit. See the difference? Fiscally, of course, there s no difference. Both methods redistribute funds from all taxpayers to college students and their families. But with the Hope Credit, many voters simply see a tax reduction. It doesn t occur to them the reduction must be made up by an increase in overall taxes, or by an increase in the national debt, otherwise known as future taxes.

Big deal, you might say. At least the money is going to a good cause. But maybe, just maybe, not everyone would agree. A nitpicker might say that the Hope Credit, American Opportunity Credit and Lifetime Learning Credit are overlapping and even conflicting programs, and that they should be consolidated into a single program that would simplify tax preparation and make results easier to judge. He might argue that demand-inflating programs can result in less affordability, not more, if supply is left constrained. If he were particularly cranky, he might even say that such ham-fisted spending programs have transformed the college degree system for many Americans from a hope-builder into a wealth-destroyer.

But there s no need for argument, because only spending programs come up for yearly review as part of the budget process. Tax expenditures (usually called credits, exemptions, deductions or deferrals) don t. Once they re enacted, they generally stay. That s why there are now 165 of them. That s why America s tax code, printed and stacked, is more than five feet tall. It s why, for each dollar in tax American workers and companies pay, an estimated 25 cents is spent in time and fees figuring out how much to pay, and another 25 cents is lost to cheating. It s why the richest nation on earth can t balance its budget. One-third of the spending escapes judgment.

Below are the five largest of our 165 tax expenditures, along with their projected cost to taxpayers over the next five years. All are beloved programs, but none are beyond criticism, as shown below. And none should be paid for through the tax code. All should be paid for openly through taxes, so that the national ledger speaks truthfully about where the money goes.

1. Exemption on money spent by employers on health care

Cost (2010 14): $923.7 billion, or $8,032 per household

How it backfires: Workers who already depend on their bosses for paychecks are made to depend on them for health care, too. That makes labor less mobile. It dissuades wage-earners from starting their own businesses, which costs jobs. It puts an added financial burden on those who lose their jobs at a time they can least afford it. It puts American companies at a disadvantage relative to foreign competitors who don t pay for health care.

A better way: Route government health-care spending to consumers more directly, and leave employers out of it.

2. Deductibility of mortgage interest on owner-occupied homes

Cost: $646.1 billion, or $5,618 per household

How it backfires: It rewards house buyers who borrow, but not those who pay cash, thereby creating an incentive for leverage. It artificially increases buying power, which can push prices higher, reducing affordability for future buyers. It rewards house owners at the expense of house renters, which amounts to social engineering, and when houses are overpriced, it punishes those who make good financial decisions. Because low-income homeowners claim the standard deduction on their tax returns, thereby disqualifying themselves from this deduction, it effectively transfers wealth from those who have less of it to those who have more.

A better way: Sunset the deduction for existing homeowners. Scrap it for new buyers.

3. Deferral of taxes for 401(k), Keogh and IRA retirement accounts

Cost: $509 billion, or $4,426 per household

How it backfires: A large assortment of accounts makes retirement planning complicated. During an economic downturn, many savers tap their retirement plans, sometimes paying more to the government than they would have if they hadn t started plans. The financial benefits of most plans depends in part on tax rates many years from now when the money is withdrawn, something that is unknowable. It s difficult (though not impossible) to invest retirement account money in things like small businesses, which can prove more economically productive (and better for job creation) than stocks and bonds. The benefits of the deferral accrue to those with savings at the expense of the poor.

A better way: Close all plans to new contributions. Replace them with low taxes on savings and investment. Leave employers free to offer matched savings plans without tax deferrals. Leave savers free to choose when to spend their money. Saving is its own reward.

4. Deductibility of charitable contributions

Cost: $274 billion, or $2,383 per household

How it backfires: Save the Children surely deserves your donations. But should money flow from all taxpayers to those who give to Shiloh International Ministries or Big Hope, registered charities whose latest financial filings show they spent less than 10% of the money they collected to help the needy? Should Christians, Jews and Muslims be forced to financially support each other s tithing? Is Harvard really a charity, with its $26 billion endowment?

A better way: Eliminate the deductions. Doing so won t kill fundraising. A citizen who today saves 10 cents on each $1 donation still spends 90 cents. Let them continue to give their 90 cents, or to give the full $1 out of a sense of... what s the word?...charity.

5. Deductibility of certain state and local taxes

Cost: $268 billion, or $2,331 per household

How it backfires: Residents of low-tax states help pay for the spending programs of residents of high-tax ones. That creates an incentive for state and local governments to raise taxes, and it punishes fiscal prudence.

A better way: Get rid of it. Let each American pay their full share of local spending, and let discontented ones take it out on local lawmakers.