I kill them as well in such cases. But it normally comes from the guards though and they're tricky to sneak kill.
Instead I prefer sharpening my blade on more racist targets, such as Bolund, Rolff Stone-Fist & Angrenor Once-Honored.
Skyrim would be much better off as a part of the Mighty Kingdom of Argonia, you'd get less racial slurs and more friendly backstabbing.
