All depends on what your design criteria are - all the suggestions above are good.
I'm thinking ANY steel is going to be strong enough, considering a #2 Morse taper is over .5" in diameter at its small end.
12L14 if you want easy to machine over anything else. Downside that it's pretty soft, not really weldable, and rusts easy.
4140 or 4130 are good choices if you want higher hardness (strength is higher too, but like I said, any of them are strong enough). High hardness, as has been mentioned, will dent/scratch less easily. Most of the 4140 prehard you get is 28-33 Rockwell C depending on your source Don't think I would recommend the annealed stuff - not really home shop friendly for the heat treat. Downside is slightly more difficult to machine.
17-4 would be kickass. Nice stainless that machines well, more or less the same strength as 4140. Probably the highest material cost of anything mentioned so far, though.
1144 (or Stressproof, if your stuff is from Niagra Lasalle) is a pretty industry standard shafting material. Machines really well, don't know much else about it.
Then there's good 'ol 1018. Cheap, readily available, kinda tough to get a good surface finish on relative to the others, and about as soft as you can get with steel. Don't drop it!
You could also go nutty and use S7. Shock resistant tool steel, crazy tough. Air hardens to 58+ HRC. Probably cost $200 for the shaft, but you'd never need another if you kept it oiled! There are also boutique stainless tool steels used for things like knives, gun barrels, etc. These can hit high hardness (40-65 HRC), retain their toughness, and remain stainless. But the cost is crazy.
1018, 1144, 4140, 12L14 are all about equal in price - quick check says about $6/ft for any of them in 3/4" round. 17-4 prehard is about $12/ft.
All I'm getting at here is that your specific criteria for this project are the most important deciding factor - if you wanted to get experience dialing in feeds and speeds, 1018 is a good one. Making a nice shaft easily, I'd go for 1144 or 4140. 12L14 is good if you just want something that works with a minimal amount of effort. 17-4 would be kickass just to have transmitting power in a spindle sander, and the rest of the machine will be dust before the shaft looks any different. The tool steels I mentioned are only good if you want the an overbuilt, crazy trophy piece and bragging rights.
