When I try to fix the indentation of an HTML file with gg=G, each line loses its indentation and becomes left-justified. Does anybody know what could be going on here?

test.html

<html>
   <head>
    <meta http-equiv="content-type" content="text/html; charset=utf-8">
    <title>Indent test</title>
   </head>
   <body>
    <div id="test">
<div id="test2">
</div>          
    </div>
   </body>
</html>

test.html after running gg=G:

<html>
<head>
<meta http-equiv="content-type" content="text/html; charset=utf-8">
<title>Indent test</title>
</head>
<body>
<div id="test">
<div id="test2">
</div>          
</div>
</body>
</html>

.vimrc

".vimrc
" Thomas
"
" This file contains tips and ideas from a wide variety of sources. Since this is for personal use, I'm lazy about
" distributing credit.
"
" Thank you, everybody.
" 

" BASICS
" --------------------------
" Searches are case-insensitive. Use /searchstring/I to disable temporarily.
set ignorecase

" Need this for some plugins to work. Not sure what it does.
filetype plugin on

" Auto-indent facility
set ai

" AESTHEICS
" --------------------------
let g:zenburn_high_Contrast = 1
let g:zenburn_alternate_Visual = 1
colorscheme zenburn 
set lines=53
set columns=130


" Turn on line numbers by default
set number

" Turn off annoying error bells
set noerrorbells
set visualbell
set t_vb=

" Show tabs and trailing whitespace visually http://docs.google.com/View?docid=dfkkkxv5_65d5p3nk 
if (&termencoding == "utf-8") || has("gui_running")
if v:version >= 700
set list listchars=tab:»\ ,trail:·,extends:…,nbsp:‗
else
set list listchars=tab:»\ ,trail:·,extends:…
endif
else
if v:version >= 700
set list listchars=tab:>\ ,trail:.,extends:>,nbsp:_
else
set li
html vim indentation
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