Preheat oven to 350 degrees F (175 degrees C). Line a 12-cup muffin pan with paper cup liners.
Stir together flour, baking powder, nutmeg, baking soda, and salt in a bowl. Cream butter, 3/4 cup plus 2 tablespoons sugar, and vanilla in a large bowl with an electric mixer until well combined. Add egg whites, one at a time, beating well after each addition. Alternately add half of the flour mixture, all the buttermilk, and remaining flour mixture, beating after each addition until just combined.
Spoon batter into prepared muffin cups, filling each about 3/4 full, and smooth tops with the back of a spoon.
Bake until a toothpick inserted into the centers comes out clean, 15 to 20 minutes. Cool in the pan for 5 minutes. Remove from the pan and cool completely on a wire rack, about 30 minutes.
Meanwhile, make frosting. Blend cream cheese, butter, lemon juice, and lemon zest with an electric mixer until light and fluffy. Gradually beat in powdered sugar to reach a spreading consistency.
Frost cooled cupcakes and decorate with luster dust and sanding sugars.
