For thin walled cylinders, hoop stress is calculated by multiplying the radius by the pressure in psi divided by the wall thickness. Based on this, if you have a smaller radius (12g. down to 20g for example)you can have higher pressure with the same wall thickness and still maintain the same hoop stress.
This from Wikipedia.
Also from Wikipedia: Fracture is governed by the hoop stress in the absence of other external loads since it is the largest principal stress. Note that since the hoop stress is largest when r is smallest, cracks in pipes should theoretically start from inside the pipe.

Seems contadictory. Am I misunderstanding this?

So many guns, so little time!