The Fire HD 7 is not an e-reader, but it can most certainly be used as one. It has the same screen size, is in full colour, and costs about the same. It's also significantly more versatile. Plus the tablet will be better for magazines and textbooks. It's a better buy unless you absolutely need the battery life, or can't read off an LCD. In that case, the vanilla Kindle would be plenty.
To be fair, the most basic Kindle offering will then have lower resolution, which means softer text. It also lacks the paperwhite reflective lighting solution, which is incredibly handy in low or no-light situations.
I have definitely made use of that feature, though I've never needed much additional lighting (at max, I've used level 5, of 20, perhaps I used the 6 or 7 setting once).
If you cannot justify it, say you are not an avid reader of novels, that's entirely fine. As I said, I could not justify it once for the longest while, not even the standard non-lit Kindle or other e-Ink offerings. Then I got tired of trying to make a multi-purpose device actually serve for every single purpose.
Many devices are CAPABLE of doing everything, but they rarely do everything perfectly. For reading, it's not as good on the eyes, and I've definitely noticed how much more pleasurable it is to read what appears to be printed text without getting bathed by a backlight.
The sharper text will be even better, and that, above all else, is why I do want the new Kindle Voyage, and the other added improvements help justify the added expense... albeit not entirely, I shall concede.
That text improvement will make it even easier to trick the eyes into the belief you are reading actual printed text, which, in the context of pleasurable reading on an e-Ink display, makes for a significant leap.