Line cookie sheets with parchment or silicone liners. Set aside.
Stir the flour, baking powder and salt together in a small bowl. Set aside.
In the bowl of a stand mixer (or large bowl and a hand mixer,) cream together the butter and sugar until light and fluffy. Add the egg and vanilla, mixing until smooth and creamy.
Sprinkle the dry ingredients into the bowl and mix on low until just combined.
The dough will be crumbly, so knead it together a bit with your hands if necessary.
Roll the dough to 1/2 inch thickness and cut out with circles or whatever you'd like.
Arrange on cookie sheets and pop in the freezer for 5-10 mins. Bake for 10-12 minutes.
For the frosting:
Cream together the cream cheese and butter until smooth and fluffy. Add the powdered sugar, 1/2 cup at a time, until thick and slightly stiff. Fold in the caramel sauce. Spread frosting on cookies and top with sprinkles if desired.
Notes
* You can use store bought caramel if you don't care to make it.