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How would I go about teaching myself how to sight read for piano, should I practice out of a sight reading book? Or should I take a piece of music with a lower grade level (such as Bach) and sight read that?

The important thing is that you choose music which is technically simple enough to fully comprehend immediately. This means music that would otherwise be well below your level. Bach is quite complex, and is hard for even advanced players to sight read. I don't know where this idea that Bach is simple came from, and it's seriously misleading.

Look into music of the Classical and early Romantic periods, such as Clementi, Haydn, some Mozart, and portions of Beethoven (his sonatas #19 and #20 are very easy, and there are easy movements of most of the rest).

I taught myself to sight-read music by remembering the whole process of how I learned to read out of books in school. I started with simple words that I already knew and understood and worked on recognition of those words on sight and using those words in phrases that made sense. After working on it for awhile, I could see the word and hear that word being said in my brain. It's much the same experience for me when I learned to sight read. I practice reading until recognition becomes automatic and I can hear the sound of the note in my brain. Just like learning songs, the process is slow at first and tests one's patience, but then the pace usually picks up and soon enough reading becomes easier. After a while you might even be able to know how a song goes without ever actually hearing it anywhere except in your head. I am a pretty good sight reader now but I still work on it because there are things I don't recognize as easily as others, and I'd like more speed and fluidity. Also I combine my sight reading with practicing scales and melodic patterns and it goes a long way towards tying everything together for me.

I think it's actually quite unimportant how you learn sight-reading, what is important is that you do it – practice frequently! So, use whatever music you like to play, which adds incentive for that.

Once you have the basics right you should also make sure to get acquainted with unusual key signatures or whatever that may not be found in the music you'd choose to listen.

Bach is definitely a good source.

For what it's worth, I'm pretty sure it's not very easy to teach oneself to sightread. I use many, many strategies with students, very few of which would work with an individual who was a beginner, alone.

There are many aspects to learning how to sightread, and for me, the most important is - find a teacher!