In a large bowl, cream butter, cream cheese, sugar and salt until light and fluffy. Beat in egg and vanilla. Gradually beat in flour. Refrigerate, covered, 1-2 hours or until firm enough to roll.
Preheat oven to 375°. On a lightly floured surface, roll dough to 1/8-in. thickness. Cut with floured cookie cutters. Place 1 in. apart on ungreased baking sheets.
Bake 7-8 minutes or until edges are lightly browned. Cool on pans 1 minute. Remove to wire racks to cool completely.
In a small bowl, beat confectioners' sugar, butter, vanilla and enough milk to reach desired consistency. If desired, add food coloring. Decorate cookies with frosting and sprinkles. Yield: about 7 dozen.