Pre heat oven to 375 degrees. In a large bowl beat butter on medium speed for 30 seconds. Add sugar, baking powder, and 1/4 teaspoon salt. Beat until combined, scraping sides of bowl occasionally. Beat in egg, milk, and vanilla. Beat in as much of the flour as you can with mixer. Stir in any remaining flour. Divide dough in half. If necessary, cover and chill dough about 30 minutes or until easy to handle.
On a lightly floured surface, roll half the dough at a time until 1/8 inch thick. Using a 2 1/2-inch cookie cutter, cut dough into desired shapes. Place 1 inch apart on ungreased cookie sheet.
Bake for 7 to 8 minutes or until edges are firm and bottoms are barely light brown. Transfer to a wire rack and let cool.
Cream Cheese Frosting
In large mixing bowl beat cream cheese, butter, and vanilla with an electric mixer on medium speed until light and fluffy. Gradually beat in powdered sugar to reach spreading consistency.