If I'm right....and I usually am....
The Knicks CANNOT pay JR Smith anything they want. JR Smith has been a Knick for 2 years. That means Knicks have his "Early Bird" rights.
Early Bird rights means Knicks can pay JR anything up to the average NBA salary. So essentially, the same amount of money as the MLE. Actually, it's higher of 175% of salary or average salary....for JR, that means average salary.
If JR wants to remain a Knick, he'll have to accept MLE type money. Otherwise, a team with sufficient cap space could "steal" JR from the Knicks with a big offer.
Will MLE money be enough for JR? Yes, I think it will be....he loves playing for Knicks and for Woodson, and I think he'll stay.