Can I merge my wife’s account with mine and increase to a larger account

You don't need to merge anything. Both of you can continue to use your own Apple IDs for iCloud (doing otherwise is very problematic in most cases) and still share a single iCloud storage billing.

See instructions in Share an iCloud storage plan with your family - Apple Support

No. There is no merging of accounts.

You can get more icloud storage space (200GB or 2TB) and invite your wife to family sharing to share that storage space if you want.

You will each retain your own accounts, and just share the storage space you subscribe to.

See here: Share an iCloud storage plan with your family - Apple Support