Preheat oven to 350°F (175°C). Line two large baking sheets with parchment paper and set aside.

Whisk together the flour, baking powder, and salt in a medium bowl until evenly combined. Set aside.

In a large bowl, beat the softened butter and sugar with an electric mixer on medium speed for 2-3 minutes until light and fluffy, scraping down the sides halfway through.

Add the egg, sour cream, and vanilla extract to the butter mixture. Beat on low speed until fully incorporated and smooth, about 1 minute.

Add the dry ingredients to the wet ingredients in two additions, mixing on low speed after each until just combined. Do not overmix — stop as soon as no flour streaks remain.

Roll the dough out on a lightly floured surface to 1/4-inch thickness. Cut into stars, circles, or other patriotic shapes using cookie cutters, then transfer to prepared baking sheets spacing them 2 inches apart.

Bake for 9-11 minutes until edges are barely set but centers still look slightly soft. Do not overbake — they should not brown. Let cool on the baking sheet for 5 minutes, then transfer to a wire rack to cool completely before decorating.

Make the royal icing by beating the powdered sugar, meringue powder, and 5 tablespoons warm water with an electric mixer on low speed for 1 minute, then on high speed for 5-7 minutes until stiff glossy peaks form. Add more water by the 1/2 teaspoon if needed for desired consistency.

Divide icing into three bowls. Leave one white, tint one red and one blue using gel food coloring. Transfer to piping bags or squeeze bottles with small round tips.

Pipe outlines around each cookie, let set for 10 minutes, then thin the icing slightly and flood the interiors. Add stripes, stars, or dots with contrasting colors, waiting 15-20 minutes between layers. Let decorated cookies dry completely for 4-6 hours before serving or stacking.