On 'working hard,' taxes, and wealth

One of the arguments against taxing the wealthy more heavily than we do is that they "work hard" for the money they've made and thus deserve full access to the rewards of their labor. This sounds extremely fair, really, but it seems that the wealthy people at the top of the business pyramid don't really follow that logic when it comes to the people further down the pyramid. Via Matt Yglesias, Alan Binder does the numbers:

When it comes to wages, the basic story of recent decades is redolent of Scrooge. Real average hourly earnings (excluding fringe benefits) now stand roughly at 1974 levels. Yes, that’s right, no real increase in over 35 years. That is an astounding, dismaying and profoundly ahistorical development. The American story for two centuries was one of real wages advancing more or less in line with productivity. But not lately. Since 1978, productivity in the nonfarm business sector is up 86%, but real compensation per hour (which includes fringe benefits) is up just 37%. Does that seem fair?

Emphasis in the original. No, it doesn't seem fair. 

I'm not sure off all the forces at play. I do know the bottom line: America's wealthiest are consuming an ever-larger slice of the economic pie. America's middle-class -- the people who make the stuff -- have been stagnating, economically, for more than a generation. I understand the liberty-based arguments against a government that redistributes wealth and regulates businesses. But my gut tells me that if we gut the government out of the equation, we merely hand control over our liberties and livelihoods to big corporations that have little interest in defending either. That's not really an acceptable outcome, I don't think.

But like I say: There's a lot I realize I don't understand about the forces at play. My plan is to spend 2011 reading about wealth, income inequality and the welfare state -- the better to understand those forces, and the better to be able to articulate and advocate for a version of society that gives entrepreneurs the freedom to create wealth for themselves and for their countrymen, but without all the ugly plutocracy.