Beat butter at medium speed with an electric mixer until creamy; gradually add 1 cup sugar, beating well. Add egg and vanilla; beat well. Combine flour and next 3 ingredients; add to butter mixture alternately with milk, beginning and ending with flour mixture. Mix at low speed after each addition just until blended. Shape dough into 2 discs. Wrap in wax paper, and chill at least 1 hour.
Roll each disc to 1/4" thickness on a floured surface. Cut with a 3 1/2" round cutter; place 1" apart on lightly greased baking sheets. Sprinkle with sparkling sugar. Bake at 400° for 7 to 8 minutes or until edges are lightly browned. Cool 1 minute on baking sheets; remove to wire racks to cool.