1.) Is it based on the actual sale price or what the house it is estimated to be worth?
2.) How is the actual tax rate calculated?
Property Taxes are usually city/county/parish/district/school board tax, not a state tax, so you'll need to check how it works for your local area.
In most places, it's based on an assessed value that is determined by your county property appraiser. Some states, such as Florida and California, have caps in place so that the value of a home won't go up excessively for a single homeowner, but may rise dramatically when the house is sold after many years held artificially low under a cap.
There should also be some sort of method for challenging the assessed value of the home, if you think it is too high or too low (believe it or not, there are reasons to raise the assessed value of your home, but it's pretty complicated). The county property appraiser's website should tell you how to do this.
In Florida, the tax rate is calculated by (budget minus other revenue such as parking tickets) divided by (assessed values of all property minus exemptions). This determines the rate for our city, county, and school board property taxes. The state has also set caps for the rate that can be imposed. (All this knowledge was worth only 1 point on the state RE exam!!!) Again, you can probably find out from your tax collector exactly how this works for your specific area.
Hope this helps.
Thanks to Proposition 13, taxes on real property in California are calculated as a flat rate of 1% of the value of the house (typically the sales price). In reality, with additional fees, the real rate is about 1 1/4%
See the link below.
Here is a link that might be useful: Link to Prop 13 in Wikipedia