Beat unsalted butter with a heavy-duty electric stand mixer on medium speed until creamy. Gradually add 3⁄4 cup of the powdered sugar, beating until light and fluffy, about 2 minutes. Reduce speed to medium-low; add egg yolk, and beat just until blended. Add vanilla and food coloring gel; beat just until combined. Gradually add flour, beating until blended, about 1 minute.

Turn dough out onto a clean work surface. Divide dough in half, and pat each half into a 5-inch-wide disk. Wrap each dough disk in plastic wrap; chill 2 hours or up to 5 days.

Unwrap 1 dough disk, and place on a lightly floured surface. Roll dough to about 3⁄16-inch thickness (between 1⁄8 inch and 1⁄4 inch thick). Repeat with second dough disk. Using each of 6 star-shaped cutters (1 inch, 1 1⁄4 inches, 1 1⁄2 inches, 2 inches, 2 1⁄4 inches, and 2 1⁄2 inches), cut 12 cookies of each size from dough. Place on parchment paper-lined baking sheets, grouping cookies of same size together. Chill cookies 30 minutes to 1 hour.

Preheat oven to 325°F. Bake cookies in batches in preheated oven until edges are very light golden and centers are pale, 8 to 10 minutes for smaller cookies and 10 to 12 minutes for larger cookies. Cool on baking sheets 2 minutes. Transfer to wire racks to cool completely, about 20 minutes.

Stir together remaining 3⁄4 cup powdered sugar and whole milk in a small bowl. Place icing in a piping bag or large ziplock plastic freezer bag with 1 corner cut to form a piping tip. Pipe icing in thin, decorative lines on edges of cooled cookies. Working with 1 cookie tree at a time, pipe a small amount of icing in the center of each cookie, and layer cookies in stacks of 6 with the largest cookie on bottom and smallest on top. Sprinkle trees with Disco Dust, if desired. Let stand until icing dries, about 10 minutes.