Make cookie dough: Cream butter, adding sugar gradually. Cream until soft and fluffy. Then add eggs one at a time, beating after each addition. Sift dry ingredients together. Alternately add ingredients and cream to egg sugar mixture. Mix well.
Chill 3 hours or overnight. Roll out on a well-floured board or countertop to 1/4-1/2 inches thickness. Shape with floured cookie cutters. Bake on a parchment paper lined cookie sheet at 350 for 8-10 minutes. (They won't be brown at all when they are done - if the cookie springs back when pressed down lightly, it is done.).
Make frosting: Whip softened butter and softened cream cheese until light and fluffy. Add vanilla and powdered sugar mixing until well combined. Add milk to bring frosting to desired consistency. When cookies are completely cool, frost. Add sprinkles if desired.