In a large mixing bowl, combine flour, extra-fine or granulated sugar and salt. With an electric mixer on medium to low speed, add butter, 1 piece at a time, beating until mixture is crumbly. Add cream cheese and vanilla. Beat mixture on low speed just until a ball forms.

On a lightly floured surface, shape dough into a ball. Divide into 2 pieces. Use your hands to slightly flatten each piece, forming 2 flat round disks. Wrap each in plastic wrap or waxed paper and refrigerate for 15 to 30 minutes or until dough is easy to handle.

On a lightly floured surface, roll out 1 disk at a time to 1/8 inch thick. Using a 2-1/2- or 4-inch cookie cutter, cut dough into desired shapes. Place 1 inch apart on an ungreased cookie sheets. (Reroll dough scraps.)

Bake in a 375 degree F. oven for 7 or 9 minutes or until edges are firm and bottoms are very lightly browned. Transfer to wire racks and let cool. Frost cookies with a thin layer of Cream Cheese Icing. If you like, decorate cookies with decorative candies or colored decorating sugar. Makes about 48, 2-1/2-inch cookies (or 20 to 24, 4-inch cookies).

In a large mixing bowl, beat one 3-ounce package softened cream cheese, 1/2 cup softened butter and 1/2 teaspoon vanilla with electric mixer until light and fluffy. Gradually add 1 1/2 cups powdered sugar, beating well. If icing is too thick, add a bit of milk to reach spreading consistency. If icing is too thin, beat in additional powdered sugar. If you like, add food coloring as desired. Makes about 1 1/2 cups icing.