The term "alt-right" has been demonized by the left, who repeatedly highlighted Spencer, so now most Trump supporters simply don't call themselves "alt-right." And for those that still do, many are just people that are unapologetic and are sick of having to back down to liberals and their constant accusations of racism. It's just one big ad hominem, and it really is, in a way, an attack on free speech (not legally, but culturally). I mean, saying something like "we need to crack down on illegal immigration" should not result in a smear campaign about how you're racist despite there being no good evidence that you're racist. This is why you see people deliberately provoking liberals and baiting them. It's an expression of free speech and a rebellion against these insane PC police that dominate the left.

So then why the hell would they choose this as their flag?

It's a joke. They did this intentionally to troll liberals who call them Nazis all the time. This is public knowledge, or at least it is on 4chan and the_donald, where the whole Kekistan meme began.