Stir together flour, spices, and salt. In a medium mixing bowl, beat together butter, cream cheese, and sugar with an electric mixer until well combined. Beat in milk and lemon peel. Add dry ingredients, beating at low speed just until combined. Chill, covered, for 2 to 3 hours or until firm. On a lightly floured surface, roll out dough to about 1/8-inch thickness. Cut into shapes using cutters.
Place on ungreased cookie sheets. Bake in a 350°F oven for 8 to 10 minutes or until bottoms are lightly browned. Cool on wire racks.
If desired, in a medium mixing bowl combine powdered sugar, meringue powder,* and cream of tartar. Add 3 tablespoons cold water. Beat with an electric mixer on low speed until mixture is combined, then on medium to high speed for 7 to 10 minutes or until mixture forms stiff peaks. (If mixture seems stiff while beating, add water, 1/2 teaspoon at a time. Icing should be fairly thick for piping. For a thinner, glazing consistency, stir in a little more water after beating.) Spread over cookies. (When not using, keep icing tightly covered to prevent drying.)
*Note: One brand of meringue powder is Wilton. Look for the powder at kitchen, cake-decorating, and crafts shops.