In a medium bowl, whisk flour, baking powder, and salt.
In a large bowl using a hand mixer, beat butter and cream cheese with sugar until light and fluffy, about 2 minutes. Beat in eggs, lemon zest and juice, vanilla, and food coloring. Beat in dry ingredients until just combined.
Cover bowl with plastic and refrigerate until firm, at least 2 hours and up to overnight.
Preheat oven to 325 °F (165 °C) and line a baking sheet with parchment paper.
Roll dough into 2" balls, then roll in powdered sugar. Let sit 2 minutes until sugar is absorbed, then re-roll in powdered sugar (do not shake off excess). Place about 2" apart on prepared baking sheet and bake until cookies crackle and are set but still slightly soft in the center, 17-19 minutes. Transfer to a cooling rack and let cool completely.
There are 130 calories in 1 serving of Lemon Butter Cookies.