I'd like to post my opinion since I got the same worry every time I bought a new iPhone.
In the end I think: once the phone internal storage is enough to provide space for vital functionalities on latest iOS version, that would be the right choice for size.
(And this "vital" space is decreasing (think about this) because new iOS does itself a storage optimisation temporarily removing infrequently used app, and reinstall them on demand.
Consider that nowadays there are cloud service streaming service, no problems with bandwidth.
Storing everything in your device is more all data loss oriented. And you'll never have enough storage to compare on what you could get real time from the net.
You may say iCloud is expensive (but easy for backup beginners). Yes it is and there are alternatives. You do not have to backup everything there.
So if you're a beginner and you don't know how to route your backup assets... yes you might worry about storage,
and might be worth to spend 100-200 bucks more for more capacity.
Otherwise I think you've got already enough skill on how to optimise your local iPhone storage and backups.
One last point... as iPhone versions are released entry level model storage capacity is incrementing...
For my experience the very first offer capacity size, looks cheap but might be a pain to manage.
Second size offered, normally's been the best choice for me (price vs. minimum size)
Not very sure for iPhone 12 if it's worth 256GB. Since 128GB look like already quite a lot of room for the device and iOS.
So the final question I would ask myself is: Am I missing some new feature/app/service that would need more local device room that 128GB could not fit, and either I cant move to the cloud?