To show that the other opinions are not shared unilaterally, not even in the US, here a statement by Feynman, the Nobel Prize winner, himself:
"I don't like honors. I'm appreciated for the work that I did, and for people who appreciate it, and I notice that other physicists use my work. I don't need anything else. I don't think there's any sense to anything else. I don't see that it makes any point that someone in the Swedish Academy decides that this work is noble enough to receive a prize. I've already got the prize. The prize is the pleasure of finding the thing out, the kick in the discovery, the observation that other people use it. Those are the real things. The honors are unreal to me. I don't believe in honors. It bothers me, honors. Honors is epilets, honors is uniforms. My poppa brought me up this way. I can't stand it, it hurts me. When I was in High School, one of the first honors I got was to be a member of the Arista, which is a group of kids who got good grades. Everybody wanted to be a member of the Arista. I discovered that what they did in their meetings was to sit around to discuss who else was worthy to join this wonderful group that we are. OK So we sat around trying to decide who would get to be allowed into this Arista. This kind of thing bothers me psychologically for one or another reason. I don't understand myself. Honors, and from that day to this, always bothered me. I had trouble when I became a member of the National Academy of Science, and I had ultimately to resign. Because there was another organization, most of whose time was spent in choosing who was illustrious enough to be allowed to join us in our organization. Including such questions as: 'we physicists have to stick together because there's a very good chemist that they're trying to get in and we haven't got enough room...'. What's the matter with chemists? The whole thing was rotten . Because the purpose was mostly to decide who could have this honor. OK? I don't like honors."
He actually played with the idea of not receiving the prize ("Surely you are joking, Mr.Feynman"), but he grudgingly acceded that there was no way to get out without having more hassle. So you are not alone in your way of thinking, Perelman who declined the Fields Medal is another example.
So what is the problem ? If you are declining something, you are sending always the message "It has for me not such a value that it something to strive for". If someone offers you then a prize or honor, people are forced to reason for themselves if a prize or honor is really something to be proud of, you are subconsciously attacking their judgement.
Back to the counterarguments:
" the medal is not just for you - it is for everybody that supported
you and, in fact, indirectly for your class, and lecturers."
about a community celebrating its own values, by recognizing the
individuals that best represent those values.[...] Accepting
recognition gives you an opportunity, which most people never
have[bold by me], to display the gratitude that you owe that community."
I think the reason is simple: The western world, especially the US, has two conflicting values: Everyone should be treated equal and people should strive for the best and leaving the competition behind. This is per definition impossible.
One acceptable solution may be: People are striving and fighting, but the collective must approve the final result. This "most people never have" is particularly telling: Why should people base their decision on what many other people which they have nothing to do with get?
By declining you are essentially denying them their power to influence you which gives them the illusion to have some control over the situation. That may be the reason people are arguing "that he thinks better of himself" and acting hurt and angry.
I find it particularly strange that here in Academia people are unaware of invisible filter bubbles. We have a huge number of different and known cultures (Deaf, LBGT, religious rights) who have a decidedly other viewpoint than the consensus. Why have people here so much trouble to understand that denying honors may have reasons which do not imply negative judgement of other people and that there people and cultures out there which even value such decisions?
However, in today's very crowded fields, a prize is like a flag that
demonstrates "this is how things should be done". It sets a signal of
example for others.
Counterargument: Why not simply celebrating the content of the research itself? Time will tell always if a discovery has any worth. And how embarassing for the prize giver if the prize and acknowledgment reward bad or offensive research. It may send "We were so blinded that we did not see the true nature of the research" and it gives an incentive for the prize giver to sweep bad decisions under a rug.
People's time is valuable so why would they bother reading a research
paper or proposal from an "unknown" with no reputation.
Because it is good science.
Sure, we have now the situation that there are so many people in the academic environment that you need to filter and choose, so your position has strong merit. On the other hand: If everyone never read anything apart from a specific group assigned with merit and good research is never capable to enter the academic mainstream: Is such an academic system not broken by definition?
We also have an ethical obligation to evaluate our colleagues' work
(because they evaluate ours),
to write recommendation letters for our students and junior colleagues
(because our advisors and senior colleagues have written them for us),
and to make our work visible (because we work for the benefit of the
community, not just for ourselves). And yes, I believe we have an
ethical obligation to help promote our communities/organizations
/subfields, because we have materially benefited from others' promotion
of our communities/organizations/subfields.
If you view the history, some countries give or gave away university education essentially for free (which is still practised in some countries), provide research opportunities without grants and with less competition there was no pressure to write recommendation letters. So many arguments you mention are much more culture-specific than you may have thought.
I accept that not receiving honors will make live a lot more difficult and the decision to do this should be carefully considered, but I do not accept that declining honors is a bad thing.