I used to think that recipients who decry, "You're much too kind!' were humble. Now I'm thinking they're startling insightful.
The kind of people who judge kindness in degrees certainly haven't earned acts of benevolence through character, merit, or deed.
Kindness is a welcome. It's an act that welcomes someone into an alliance. I offer a gift that addresses an echoed attribute that we both share. The attribute can be characteristic or atmospheric. We share the same temperament or testament or we share the same familial or societal space. I acknowledge that we're "two of a kind" by an offering of kindness.
Now as an aside: a charitable act is not equitable. So there is no echoed attribute. Charity is a benevolent act based solely on need. Character, merit, and deed are absent in the charitable act. No. Read that again. I'm not saying the recipient lacks character, or hasn't merit, or hasn't accomplished a praiseworthy deed. I'm asserting charity is about the obligation of the giver and not the recipient of the given.
"You're much too kind," literally means, "we're too alike!" Well, yet that's not true. If the similarity was uncomfortably close, then the recipient and the giver would mirror emotions and the gift and its reception would have equitable proportion. So it must be interpreted as "Your act of kindness exceeds propriety or proportion." The act was too kind. The sentence cannot be "You're too kind." No one can be too kind.
So the sentence must mean, "You're too kind to me."
And I'd agree.