Objective This article explores the effect of the racial structure of inequality on redistributive policy in the states. Methods Applying measures developed in Hero and Levy (2016), we use fixed effects regressions to assess the impact of between‐race inequality on multiple measures of state welfare effort and generosity. Results We find a strong negative association between racial inequality and all measures of welfare policy. The total level of inequality and the racial composition of the population, by contrast, are not associated with the welfare policy measures. The impact of racial inequality emerges after, but does not appear before, the 1996 national welfare reform that increased states’ discretion over welfare policy. Conclusion These findings illustrate that the influence of income inequality on public policy is strongly conditioned by racial “structure.”