I have a friend that I met a few years ago, and as our friendship grew to golf / trips to audio shows / etc, he (I guess) became more comfortable, and about a year or so ago, started letting his racist flag fly when we were alone. It's funny - the first 2-3 years of our friendship, I didn't know this about him. I started noticing it when the whole confederate flag / statue thing was the big news of the day - he was all-in on the statues should stay, the confederate flag is great, blankety blank to those n-words who don't like it, etc.
I immediately called him out on it. He tried to counter with "well, that's how I am", to which I replied "no you're not - you've never been like this before. I'm certain you're not like this at your job. I know you're not like this in public, or on Facebook... what you are is a coward, because you hide this side of you."
Predictably, we've started growing apart a little, because I know he's uncomfortable around me now (our wives have become friends too, and right now, their friendship eclipses ours). I want to try and help the guy, because otherwise, he's a decent friend/guy, and I feel this stuff can be unlearned and overcome. I don't know where it's going (the four of us are going out to dinner Sat), but in the end, I won't be friends with people who talk like this.