Sift flour and baking powder into a bowl. Add salt and set aside.
Into a bowl of a stand mixer fitted with the paddle attachment, beat butter and sugar on medium speed until well combined, about 3 minutes. Add cream cheese and until well combined. Scrape down the side of the bowl as needed. Add vanilla and beat until well combined.
Reduce speed to low and add flour mixture and beat just until incorporated and the dough starts to come together.
Scrape the dough onto a lightly floured work surface and divide it in half. Shape each half into a disk, then wrap each disk in plastic wrap and refrigerate for 2 hours.
Preheat oven to 350º F. Line two baking sheets with parchment paper.
Over a big piece of parchment paper, or on a lightly floured surface roll out the dough disk about 1/4-inch thick. Cut into desired shapes, place at least 1-inch apart on the prepared baking sheet. Refrigerate for 15 minutes.
Gather up the dough scraps and form into a disk, wrap, and refrigerate for 15-20 minutes. Then roll out and cut again. Repeat step 6.
Bake for 10 - 15 minutes or until cookies are just beginning to turn brown around the edges. Remove from the oven and let them sit on the baking sheet for 2 minutes. Then move to complete cooling on wire rack.
Serve as is or decorate with royal icing as desired.
Store in an airtight container for up to 1 week.