Preheat oven to 350 degrees. Line a muffin tin with paper liners and set aside.
In a large bowl, beat egg whites until stiff peaks form. Set aside.
In another large bowl, beat butter and sugar together until light and fluffy, 2 minutes. Stir in vanilla.
In a small bowl, combine the dry ingredients. Alternate stirring in the dry ingredients with the milk until none remain. Scrape sides to ensure even mixing.
Fold in whipped egg whites.
Divide batter between 3 different bowls. Stir red food coloring into one and blue into another one.
Alternating between the white, red, and blue cake batters, spoon into prepared cupcake pans, alternating colors. Once muffin tins are filled 3/4 of the way, bake 15-20 minutes or until a toothpick comes out clean after being inserted. Set aside to cool.
For the frosting, beat cream cheese and butter together to combine. Stir in powdered sugar and vanilla. Scrape sides and beat for 3 minutes until the frosting lightens in color and thickens slightly.