Beat butter and sugar at medium speed with a mixer until fluffy.
Stir together 1/4 cup water and soda until dissolved; stir in molasses.
Combine flour and next 4 ingredients. Add to butter mixture alternately with molasses mixture, beginning and ending with flour mixture. Shape mixture into a ball; cover and chill 1 hour.
Roll to 1/4-inch thickness on a lightly floured surface. Cut with a 7 1/2-inch snowflake cookie cutter. Place 2 inches apart on parchment paper-lined baking sheets. Cut out designs in snowflakes using 1/4- to 1/2-inch cutters, and remove.
Bake at 350° for 12 to 15 minutes. Remove to wire racks to cool.
Spoon icing into a small heavy-duty zip-top plastic bag. Snip a tiny hole in 1 corner of bag; pipe around edges of cookies. Sprinkle icing with sugar, if desired.
Note: Sparkling sugar can be found at cake decorating and kitchen shops.
Royal Icing dries rapidly. Work quickly, keeping extra icing covered tightly at all times.