I had to move the settings from Normal to the next lowest. To be quite honest and show my true n00bness, I didn't know I could quick build things. That had quite a bit to do with it.
1. I had freighters out as soon as possible and maxed out trade right after diplomacy, This helped alot with bc.
2. As far as the taxes. I adjusted my Industry to low to start and focused on Research. In the beginning I kept my approval around 70%. But, my research was going through the roof. It counteracted by me being able to build up my social resources early in the game so later I could focus on military production.
3. When I say I kept it at 70% that means if my approval was at 85% I raised taxes until they hit 70% approval. This let me amass a ton of money so I could float large fleets without going red. When I hit 300k I launched my fleets and went into super production. It stayed yellow the rest of the game.
4. I counteracted the economic loss by keeping my bc loss to around 100 per month which let me keep researching.
5. I focused on one weapon and ran that as far as I could. I picked the biggest baddest mother out there and put advanced espionage on him and found out what his weapons were then blew that defense up.
6. I took about 100 rounds of starbase building out the yang. I had maxed my four bases out within 100 turns. That provided my fleets with the extra umph they needed.

I didn't realize at first how customizable the domestic scenario you can create. I won't start another game at 5:00 this time though, I'll start in the morning.

Psio

Congrats on your win, to share I just lost my first game after being undefeated on Normal and Challenging I got rolled in my 2nd game on Tough.

My Neibours the Dregin, Yor, Knorx and Drath all decided to drop by within two turns and 11 turns latter my last planet was taken. Good example of what happens when you ignore Diplomacy in favour of weapon techs.

It was awesome, major fleet battles every turn, killed over 60 escorted transports ( kinda miss the days of 1.0 where you could transport pick with a 1 attack cargo hull)

Maxed out starbases in 100 turns, pshaw.
Try ten for maxing out military starbases with all starbase techs, and maxed out one weapon and one defence tech. Haven't lost yet, worked up from one game on Cakewalk, up a level with each new game. Currently on Crippling, and looking like a win...