In a bowl, combine sugar and butter; beat until creamy. Add eggs and vanilla; beat well. Stir together dry ingredients; gradually add to creamed mixture until completely blended. Chill for 30 minutes.
On a lightly floured surface, roll dough to a 1/4-in. thickness. Cut with holiday cutters dipped in flour. Using a floured spatula, transfer cookies to ungreased baking sheets. Bake at 350° for 10-12 minutes. Cool on wire racks.
For frosting, combine sugar, butter, vanilla and milk; beat until creamy. Thin with additional milk to desired spreading consistency if necessary. Add a few drops of food coloring if desired. Spread frosting over cookies and decorate with colored sugar. Yield: 7 dozen (2-1/2-in. cookies).