In the bowl of an electric mixer fitted with the paddle attachment, cream the butter and cream cheese together until light and fluffy.

Add the granulated sugar and beat until well combined, about 2 minutes. Mix in the egg and vanilla extract until incorporated.

In a separate bowl, whisk together the flour, baking powder, and salt. Add the dry ingredients to the creamed mixture. Mix on low speed until the flour is fully incorporated, about 1 minute 30 seconds.

Gather the dough into a ball and pat into a flat disk. Wrap tightly and refrigerate for at least 4 hours, preferably overnight.

Preheat the oven to 350°F. Line baking sheets with parchment paper.

Roll half of the chilled dough on a lightly floured surface to 1/2-inch thickness. Keep the remaining dough refrigerated. Cut into shapes using floured cookie cutters or templates.

Transfer shapes to prepared baking sheets and chill for 10 minutes (or 5 minutes in the freezer).

Bake for 12–15 minutes, depending on size. Three-inch cookies bake in about 12 minutes.

Cookies are done when edges are lightly golden and centers appear pale and matte. Transfer to a wire rack and cool completely before decorating, or serve plain.