It is also my experience that property taxes are based on the value of both the land and improvements. Your local tax assessment office could clarify for your area.

J,

Property taxes are based on both the land and the dwelling in Arizona.

In my experience, property taxes are based on land and improvements (structures). In NH, The value and condition of the structure is also rated (i.e. excellent, good, fair, poor) and a percentage is applied based on this determination. In southern CA however, the value is best on and reflects the most recent sale price. There are exceptions to this however when properties are located in areas that are protected, for instance the Mills Act (a property tax abatement program) which is an incentive program in California for the restoration and preservation of qualified historic buildings. If you have any other questions, please don't hesitate to contact me.

Great question, I am not sure about AZ but anywhere I have ever written a loan taxes are based on both land and home. What they do now to keep your property taxes artifically high is to claim that the value of your home dropped but that your land value rose. That's not very nice. You can appeal the assesed value, I am doing just that now. Be prepared to do battle though, it's a tough fight but if you are convinced then go for it.
Hope this helps.