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I've never actually thought of Dixie as racist per se, although that may be because I'm from the north and never really hear of anyone actually being named Dixie. I knew a Dixi and my biggest complaint of her name was it doesn't sound very substantial, more like it's a nn for something bigger and better. Here Dixie is a recognzieable term for the South but I would venture to say Dixie makes people around here think about paper plates and itty bitty paper cups as much as it does the South.

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I didn't really answer your question did I? And honestly, I have no idea what the etymology of Dixie is.