Cream the softened butter, softened cream cheese, and 1 1/2 cups sugar until smooth and fluffy. Beat in the egg and vanilla extract.

In a separate bowl, whisk together the flour, baking powder, 1 teaspoon cinnamon, and salt. Gradually mix the dry ingredients into the cream-cheese mixture just until a soft dough forms.

Cover the dough and refrigerate for about 1 hour, or until firm enough to handle.

Heat the oven to 350°F (175°C) and line baking sheets with parchment paper. Stir together the coating sugar and 1/2 teaspoon cinnamon in a shallow bowl.

Scoop or roll the chilled dough into approximately 1-inch balls, then roll each ball in the cinnamon sugar. Arrange them about 2 inches apart on the prepared baking sheets.

Bake for 10–12 minutes per batch, until the cookies look set but remain pale and soft. Cool on the baking sheet for 5 minutes, then transfer to a wire rack.