Am I wrong?

Yes.

The way this photographer is conducting their business is standard in the photography industry. Here’s a list of reasons why most photographers won’t give you the RAW files

• In the US and many other countries, the person who takes the photo owns the photo. It’s literally something they created and are not obligated to give it to anyone.
• RAW files are huge, and if you do a photoshoot with hundreds of photos, sending those files to the client can be a huge pain
• Many RAW codecs require special drivers to preview on your operating system, and special software to edit. I do send clients RAW photos for an additional fee, and even though I always send them with explicit instructions on how to handle the files I always get an e-mail saying they can’t open them. Literally. Every. Single. Time.
• Photography, particular in the modern era, isn’t just about knowing how to operate a camera and some lights. The editing process is a large part of the skill that goes into being a photographer. With the RAW photos, you could very easily make some wacky edits to them, post them someone where online or in public, and potentially damage the photographer’s reputation since they took the photo.

There is no expectation of privacy in the US if you are in public. You could literally walk up to a random stranger, take their photo and post it online. This is basically the entirety of the genre of street photography.

What you cannot do is license that photo for commercial use, since you don’t own the rights to their likeness.

More than needing to raise your rates, you need to shift your perspective. You have the attitude of an employee. You’re not an employee. You are an entrepreneur, albeit a solo one. You don’t have a boss that decides to give you a raise or not, you have a client. Notify them that your rates are increasing.

If they decline, then you can use the time you would normally spend working with this client to secure new customers with bigger budgets.