This paper examines the provision of collective goods in response to increasing economic inequality within ethnic groups and ethnic diversity in the United States. Conventional evidence suggests that ethnic fractionalization is inversely related to public goods provision due to lower societal support for investment in public goods, driven by group loyalty and negative perceptions of minorities. However, this study challenges that view by offering alternative explanations for limited provision of public and welfare goods in the United States, based on state-level balanced panel data analyses. Two-way fixed-effect estimations indicate that ethnic fractionalization primarily affects more excludable and redistributive public goods. This influence is particularly pronounced when White prototypicality is threatened, and when there is greater socioeconomic inequality among different ethnic groups.