It depends.
We are now going to be at the cap. If IT is fully healthy, then you pay him. This will basically guarantee that we are again at the cap, in which case it depends on the Lux Tax that Wyc is willing to pay for a very good team that will likely only get better and, if rumors are to be believed, might be seeing Lebron bolt for LA in the Western Conference, meaning lots of potential finals appearances and the resulting revenue. In that case, because you are capped out anyway, it makes sense to keep a valuable RFA piece like Smart as well.
If IT is not healthy, you could just let him walk, in which case you have a choice; keeping Tatum, Brown, Crowder, Horford, Hayward, BKN #1, etc, but renouncing bird rights for Smart (RFA) and IT (UFA) might get you close to 1 more max salary. Unfortunately, I am glad we got Hayward this year, because the potential Max Free Agent market for 2018 looks good on paper, but not reality.
You have Player Options for Durant, Lebron, Carmelo, Paul George, Westbrook, Aldridge.
Pure UFAs include Boogie Cousins, Favors.
At this point, Aldridge has kind of fallen off a cliff. Durant is staying with GSW. I only see Lebron, Carmelo, George opting out to go to LA or a similar team-up destination, not to join Horford and Hayward in Boston. OKC can offer a lot more to Westbrook than competitors.
So really, if you are trying to carve max cap space, you are putting all your eggs in a boogie cousins basket. Or, using picks in order to trade for a player into the capspace.
So, I think the most likely thing is IT is healthy, great offensive player, you pay him which puts you in the cap, then you take advantage of bird rights, MLE, good draft picks, etc, to stay above the cap and flush out the team.