In a large bowl beat the sugar, butter, and egg with an electric mixer on medium speed until light and fluffy, about 3 minutes. Beat in the vanilla.
Stir the flour and baking powder into the butter mixture. Shape the dough into a disk, wrap in plastic, and chill for 30 minutes.
Preheat the oven to 350°F and line a baking sheet with parchment paper. On a lightly floured work surface, roll half the dough to 1/4-inch thickness and cut with 2- to 3-inch cookie cutters or the tip of a paring knife.
Gently transfer the cookies onto the baking sheet with a spatula. Bake for 8 minutes or until cookies are just set and lightly browned on the bottom. Let cool completely on the baking sheet.
In a medium bowl whisk together all the cookie paint ingredients except the coloring and, if using, sprinkles or decorations. Divide the icing into several small bowls or cups and tint with food coloring. With a clean food grade decorating brush, "paint" the icing on the cookies. Decorate or apply sprinkles, if desired. Let each cookie dry completely before eating.