Why does low frequency RFID have a short read range?
Because RFID doesn't work based on wave propagation. It's thus not actually a radio system (despite working at "RF"=Radio Frequency). 

Think of an RFID tag more as the secondary side of an air-core transformer, where information is transmitted by the tag changing the amount of power it draws from the primary side of the transformer, or by charging a energy storage (capacitor), and then exchanging the role of secondary and primary side of the transformer.

Because we're not talking about a wave propagating away from antenna, but about a coil coupling into a magnetic field, the decay in power is even worse than the distance² for free space loss, and after a couple of cm, practically no effect of the tag on the reader can be made.