You must listen to the tape.
One man in the audience was telling Michaels he had no talent, that he didn't get a movie or a TV show after Steinfeld because he's no good. The guy was VERY loud and there is no way that Michaels could have ignored it. I take it from Michaels' rant, that what started it was when a black man/men in the audience were talking loudly during his act. That is what started Michaels on a racist rant about blacks.
So because the people who heckling him happened to be black, that allows him to go on a racial rant? Were they heckling him about his race? Otherwise, it doesn't make any sense.
That's part of being a comic. If you can't take the heat of heckling, get out of the business.
Or you could go to the heckler's office and heckle them while they work at their job.
Responding by skewering the heckelers' boorish behavior is OK. Responding by showing a superior with is OK. Making fun of how the guys dress or look may also be within bounds.
If the only thing a person has to hang their hat on when matching wits with someone is to insult the other's ethnicity, that person is in trouble in life in many ways.
No excuse. It is racist and very ugly.
What "leaves people gasping" in the U.S. as a racist comment wouldn't even make a blip on the screen practically anywhere else in the non-Western world. No one raised in the present-day U.S. knows what racism is until he travels abroad. U.S. xenophobia and racism are but the mildest vanilla compared to everything else. It is only those with no experience who think it's so bad here. They're the equivalent of a 4-year-old gasping when he hears the word "crap" thinking that he's heard some truly dirty language.