As Washington lawmakers struggle to find ways to balance the national budget, a significant source of revenue may be burning away right before their eyes.

The federal legalization of marijuana would offer a large new revenue stream, according to research from the Cato Institute, a libertarian think tank.

"We don’t know the size of the marijuana market right now, and we certainly don’t know what would happen to the price and the demand for marijuana under different levels of legalization," Carl Davis, senior analyst at the Institute on Taxation and Economic Policy told The Huffington Post. "But we do know that legalization would lead to a positive revenue impact on the income and sales tax side."

According to a 2010 study from Cato, legalizing marijuana would generate $8.7 billion in federal and state tax revenue annually.

The researchers assumed that legalized marijuana would be taxed similarly to alcohol and tobacco and that the income earned by pot producers would be subject to standard income and sales tax.

Taxes aren't the only source of revenue that would come from legalizing weed, according to the study. State and local governments also stand to save billions of dollars that they currently spend regulating marijuana use.

Washington and Colorado, both states that have legalized the use of marijuana recreationally, will serve as litmus tests to measure the possible fiscal impact of marijuana legalization on a national level. The state of Washington estimates it will generate as much as $1.9 billion in additional revenue in five years due to the legalization of marijuana.

Eighteen states and Washington, D.C. have already made medical marijuana legal and 10 others are currently considering leglislation to legalize medical marijuana, according to the National Cannabis Industry Association.

A majority of Americans support weed legalization, according to a recent Pew Research Center poll.

Still, opponents of marijuana legalization argue that any fiscal benefits from legalization are outweighed by the social impact. Legal weed will continue to contribute to violence, crime, and social disintegration of the country, according to a report from the Heritage Foundation, a conservative think tank.

The research was done by Jeffrey Miron and Katherine Waldock.

Also on HuffPost:

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  • $13.7 Billion Saved On Prohibition Enforcement Costs

    The government would save an estimated $13.7 billion on prohibition enforcement costs and tax revenue by legalizing marijuana, <a href="http://www.huffingtonpost.com/2012/04/17/economists-marijuana-legalization_n_1431840.html" target="_hplink">according to a paper endorsed by 300 economists</a>.

  • Marijuana Inmates Cost Prisons $1 Billion A Year

    Inmates incarcerated on marijuana-related charges cost U.S. prisons $1 billion annually, according to a 2007 study, <a href="http://www.alternet.org/rights/47815/" target="_hplink">AlterNet reports</a>.

  • Marijuana Prohibition Costs Taxpayers $41.8 Billion A Year

    Including lost tax revenues, a 2007 study found that enforcing the marijuana prohibition costs tax payers $41.8 billion annually, <a href="http://www.forbes.com/2007/09/29/marijuana-laws-work-biz-cx_qh_1001pot.html" target="_hplink">Forbes</a> reports.

  • California Marijuana Crop Worth $14 Billion A Year

    Marijuana growers account for <a href="http://www.time.com/time/nation/article/0,8599,1884956,00.html" target="_hplink">$14 billion a year in sales in California</a>, making it the state's most valuable cash crop, TIME reports.

  • Illegal Marijuana A $36 Billion A Year Industry

    It's estimated that <a href="http://madamenoire.com/106691/capitalizing-on-the-billion-dollar-marijuana-industry/" target="_hplink">illegal marijuana is a $36 billion industry</a> in the U.S., MadameNoire reports.

  • One-Third Of Americans Think Legalization Would Boost The Economy

    About one-third of Americans say they think <a href="http://www.huffingtonpost.com/2010/04/20/legalizing-pot-will-not-b_n_544526.html?" target="_hplink">legalizing marijuana would boost the economy</a>, according to a 2010 poll by Associated Press-CNBC.

  • Dispensary Ads Boost Newspapers' Revenue

    The <em>Sacramento News and Review</em> saw a big boost in ad revenue when it offered advertising space for more than 60 medical marijuana dispensaries, enabling the publication to hire three additional employees, <a href="http://www.news10.net/news/local/article/144285/2/Marijuana-ads-mean-big-money-for-weekly-newspaper" target="_hplink">according to News 10</a>.

  • Mendocino Zip Tie Program Raised $600,000

    Mendocino County, California's zip tie program aimed at regulating medical marijuana growing by charging permits for each plant raised <a href="http://www.huffingtonpost.com/2012/01/09/medical-marijuana-license-mendocino_n_1193198.html" target="_hplink">$600,000 in revenue in for the Sheriff's department</a> in 2011.

  • Oakland Raised More Than $1 Million In Marijuana Tax Revenue

    The city of Oakland, California raised $1.3 million in tax revenue from medical marijuana dispensaries in 2011, 3 percent of the city's total business tax revenue, according to <a href="http://www.nytimes.com/2012/02/12/us/cities-turn-to-a-crop-for-cash-medical-marijuana.html?_r=1" target="_hplink"><em>The New York Times</em></a>.

  • Colorado Pulls In $5 Million From Pot Sales Tax

    In 2011, Colorado pulled in $5 milllion in sales taxes from medical marijuana businesses, <a href="http://www.nytimes.com/2012/02/12/us/cities-turn-to-a-crop-for-cash-medical-marijuana.html?_r=1" target="_hplink"><em>The New York Times</em></a> reports.

  • Legal Marijuana Could Be $100 Billion Industry

    Economist Stephen Easton estimated in 2010 that <a href="http://www.businessweek.com/debateroom/archives/2010/03/legalize_mariju.html" target="_hplink">legal marijuana could be a $45 to $100 billion industry</a>, <em>Bloomberg Businessweek</em> reports.

  • Each weGrow Center Creates 75 Jobs

    When hydroponic marijuana growing supply chain weGrow opens a new store it <a href="http://aznow.biz/small-biz/wegrow-phoenix-opens-cultivates-opportunities-arizona)" target="_hplink">creates an estimated 75 jobs</a> indirectly, according to AZBusiness Magazine.

  • Majority Of States Support Taxing Marijuana

    More than <a href="http://www.huffingtonpost.com/2010/04/20/legalizing-pot-will-not-b_n_544526.html?" target="_hplink">60 percent of states agree with taxing marijuana</a>, according to a poll by Associated Press-CNBC.

  • Marijuana Affects Workplace Motivation

    A Norwegian study 25 years in the making came to the shocking conclusion that <a href="http://www.huffingtonpost.com/2012/02/24/marijuana-use-has-adverse-affect-workplace-motivation_n_1300278.html?" target="_hplink">frequent marijuana use lowers employees' motivation at work</a>.

  • More Than 1,000 Dispensaries In California

    There could be more than 1,000 medical marijuana dispensaries operating in California, <a href="http://www.pasadenaweekly.com/cms/story/detail/how_does_your_pot_grow/8070/" target="_hplink"><em>Pasadena Weekly</em></a> reported in 2009.

  • Denver Counts More Dispensaries Than Starbucks

    As of July 2011, the city of Denver <a href="http://www.huffingtonpost.com/2011/07/06/medical-marijuana-denver-starbucks_n_891796.html" target="_hplink">counted more medical marijuana dispensaries than Starbucks franchises</a>.