Paper towels, napkins, and tissue cannot generally be recycled. Every time paper is recycled, the fibers break down a bit. Office paper has high quality, long fibers (and recyclers love it), but by the time it’s tissue and cardboard, the fibers are generally too short to do anything with. I compost those.
I’ll also throw in paper bags, if I have only a few. They’re a great “brown” to throw in if I have too many “greens.” However, if I have a lot of them, they go to recycling. Recyclers love bulk – anything in quantity is easier to find a market for – but it’s easier to compost just a couple bags or sections of newsprint.