my sister-in-law has a purebred Chihuahua who acts the same way. It could be a protective thing, but in this case I think it may mean that she feels she is alpha and therefore should get all the attention. Little dogs are often coddled, spoiled and allowed to get away with outrageous behavior. NOT saying that is the case with you, but it's quite common.
Does she also growl at you over food, toys, position on the furniture, etc?
Your dog needs to know that YOU are in charge, and she will not be telling you what you can and cannot do.
I suggest obedience training and lots of practice, and a "Nothing in Life is Free" regimen which means that the dog gets nothing - walks, food, attention - until she does something for it, like "sit" or "down". This will teach her that you and your wife are alphas and that she is the lowest ranking pack member.
Once she knows her commands, put her in a sit, then touch your wife. If the dog behaves, she gets praise and /or a treat. If she does not obey, she gets put back into a sit until she holds it.
If she is "barking like crazy", she gets a time-out in her crate or another room. You must be consistant that her behavior is NOT allowed.