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Ummmm... no idea.
Toe rag or toe-rag is more understandable and may even be more correct, but I've seen it written as toerag before.
I can only assume it refers to a rag used to clear detritus from between toes (toe jam as we call it). Which would make it nasty and scummy and low.
It's most used alongside words like dirty or nasty, and almost always with little. A person of no value, of criminal bent.
Practice it in your best English accent, "You dirty little toe-rag!"
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